Bitcoin price prediction: Why BTC is falling ahead of Fed decision

Bitcoin price remained under pressure on Wednesday morning as investors waited for key events like the Federal Reserve interest rate decision and talks between Donald Trump and Xi Jinping. BTC was trading at $112,538, down from this week’s high of $116,200.

Bitcoin price pulls back ahead of Fed decision 

The BTC price has dropped in the past three consecutive days as investors focused on the upcoming Federal Reserve interest rate decision.

Economists expect the bank to cut interest rates by 0.25% to stimulate an economy that is showing signs of slowing down.

Data released by the Conference Board showed the country’s consumer confidence dropped to 94.6 from the previous 95.6 as residents remained worried about the labor market and inflation.

A report released earlier this month by ADP showed that the economy lost 36,000 jobs in September after shedding 3,000 in the previous month. 

That is the only key labor data released this month as the US government remains in a shutdown. However, more companies like Target, Amazon, and UPS have announced large layoffs.

Another important report released on Friday last week showed that the country’s inflation rose from 2.9% in August to 3.0% in September. Core inflation, which excludes the volatile food and energy prices, fell to 3.0% in September.

While these inflation numbers were lower than expected, they remain much higher than the Federal Reserve's target of 2.0%.

Therefore, the bond market is pointing to the second interest rate cut of the year. The ten-year bond yield has dropped to 3.97% from the year-to-date high of 4.8%. Similarly, the five-year yield has moved to 3.6% from the year-to-date high of 4.6%.

Similarly, traders on Polymarket and other prediction markets believe that the bank will cut interest rates this time as most Fed officials, including Jerome Powell, have hinted. Powell also hinted that the bank will end its quantitative tightening process.

Trump-Xi meeting

The other main catalyst for the Bitcoin price is that Donald Trump will have a meeting with Xi Jinping to ratify a deal that was negotiated during the weekend.

This deal will likely see US slash tariffs of goods imported from China as the country has committed to fight the fentanyl battle. China will delay the rare earth materials export controls by one year and start buying soybeans.

Bitcoin price is falling despite these events because of a situation known as buy the rumor, sell the news. This is a situation where an asset rises ahead of a major event and then retreats when it happens. 

In this case, the Federal Reserve interest rate cut and the meeting have not happened yet. However, traders are assuming that the news events have happened already since they have already been telegraphed.

BTC price technical analysis 

The daily timeframe chart shows that the Bitcoin price has dropped in the past three consecutive days, moving from a high of $116,510 to the current $112,545.

It is consolidating along the 50-day and 100-day Exponential Moving Averages, a sign of indecision in the market.

On the positive side, the coin has formed a megaphone pattern, which is made up of two diverging trendlines. 

Therefore, the coin will likely have bounce back in the coming days, potentially to this week’s high of 116,510. A move above that level will point to more gains, potentially to the psychological level at 120,000..

The bullish Bitcoin price forecast will become invalid if it moves below the important support level at $108,000.