Bitcoin Price Retraces Above $116,000 as Crypto Markets Brace for Fed’s Pivotal Interest Rate Decision

Bitcoin (BTC) has demonstrated resilience by retracing to the $116,000 price zone, hitting $116,795 after briefly pulling back to $114,395 earlier this week, as traders worldwide closely monitor the Federal Reserve’s upcoming policy decision that could reshape the cryptocurrency landscape for the remainder of 2025.

The world’s leading cryptocurrency continues to consolidate above the psychologically important $116,000 level, with immediate resistance clearly defined between $117,000 and $118,000. A decisive breakout above this critical zone could signal a major structural shift on higher timeframe charts, potentially igniting the next major rally phase that many analysts believe could propel Bitcoin toward new all-time highs.

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Fed Decision Day: Markets Price In Rate Cut with 96% Probability

The Federal Open Market Committee (FOMC) will announce its highly anticipated interest rate decision on Wednesday, September 17, at 2:00 PM Eastern Time, with markets overwhelmingly expecting a 25-basis-point rate cut. According to CME’s FedWatch Tool, the probability of a quarter-point reduction from the current 4.25%-4.50% range stands at an overwhelming 96%.

This decision carries unprecedented weight for both traditional markets and digital assets, as it’s expected to set the monetary policy tone for the remainder of 2025. The Fed has maintained rates at the current level since December 2024, resisting political pressure from the Trump administration while carefully monitoring inflation and employment data.

Federal Reserve Chair Jerome Powell’s post-meeting press conference at 2:30 PM ET will be particularly crucial, as markets will dissect every word for clues about the pace of future rate cuts. Traders are currently pricing in additional cuts in both October and December, with more than 70% probability assigned to each meeting.

Institutional Bullishness: ETF Flows and Liquidity Expectations

Tom Lee, Head of Research at Fundstrat Global Advisors, told CNBC that Bitcoin and Ethereum could be among the biggest beneficiaries if the Fed moves forward with rate cuts. According to Lee’s analysis, both assets are highly sensitive to liquidity conditions and could experience a “monster move” within the next three months.

Lee specifically highlighted Bitcoin, Ethereum, the Nasdaq 100, and U.S. small-cap stocks as key areas to watch, emphasizing that lower borrowing costs historically restore investor confidence and fuel liquidity-driven trades. This institutional perspective aligns with growing sentiment that cryptocurrency markets are increasingly correlated with traditional risk assets, particularly when monetary policy shifts create significant liquidity changes.

The correlation between Bitcoin and traditional risk assets has strengthened considerably throughout 2025, with the cryptocurrency often moving in tandem with tech stocks during major market events. This relationship suggests that Fed policy decisions now carry more direct implications for crypto markets than in previous cycles.

Technical Analysis: Bullish Signals Emerge Despite Resistance

Market sentiment indicators show remarkable strength, with social data revealing that 64% of online commentary about Bitcoin remains bullish—the highest level recorded since July 2025. This optimism reflects growing confidence ahead of the Fed’s announcement, though seasoned traders note that markets often move contrarian to overwhelming consensus.

On the technical front, prominent crypto analyst Jelle has identified that Bitcoin’s weekly stochastic RSI has flipped bullish, a signal that historically has preceded average rallies of approximately 35%. If this historical pattern repeats, Bitcoin could surge toward the $155,000 target level, representing significant upside potential from current levels.

The technical setup appears increasingly favorable, with several key indicators aligning:

Moving Averages: Bitcoin trades above its 20-day moving average around $113,500 and its 50-day moving average, indicating short-to-medium term bullish momentum.

Volume Analysis: Trading volume has increased to $46.71 billion, up 46.84%, suggesting renewed institutional and retail interest as the Fed decision approaches.

Support Levels: Strong support has been established at $115,000-$115,850, with additional backing at the psychological $100,000 level where significant buy orders have accumulated.

Ambitious Price Predictions: $200K Within 170 Days?

Bitcoin network economist Timothy Peterson has made one of the most aggressive predictions in the current cycle, suggesting that BTC could reach $200,000 within 170 days. Peterson’s forecast is based on repeating cycle patterns and network adoption metrics rather than traditional technical analysis, representing a more fundamental approach to price prediction.

This $200,000 target, while ambitious, aligns with other long-term bullish forecasts from institutional analysts who point to several structural factors supporting higher prices:

Institutional Adoption: Growing corporate treasury adoption and ETF inflows continue to reduce Bitcoin’s available supply on exchanges.

Monetary Debasement: Central bank policies globally continue to increase fiat money supplies, potentially driving demand for alternative stores of value.

Network Effects: Bitcoin’s network continues to strengthen with increased adoption, infrastructure development, and mainstream acceptance.

September Seasonality: Navigating Historically Weak Month

Bitcoin’s recent strength comes despite September’s historically poor performance for the cryptocurrency. Since 2013, Bitcoin has posted average returns of -3.77% in September, closing lower in 8 of the past 12 years. This “Red September” phenomenon mirrors broader market patterns, with the S&P 500 averaging -1.20% returns in September since 1928.

However, several factors may break this seasonal pattern in 2025:

Fed Policy Pivot: The anticipated shift to a more accommodative monetary policy stance could provide significant tailwinds for risk assets, including Bitcoin.

Institutional Positioning: Record levels of institutional involvement in Bitcoin markets may provide more stable support during traditionally volatile periods.

Election Cycle Dynamics: The political environment and policy expectations may create different dynamics than typical September patterns.

Bearish Perspectives: Caution Amid Enthusiasm

Despite overwhelming bullish sentiment, notable skeptics continue to voice caution. Peter Schiff, longtime gold advocate and prominent Bitcoin critic, has warned that BTC might be “topping out” as it struggles to break decisively past the $116,000-$117,000 resistance zone.

Schiff points to recent breakouts in gold and silver markets while highlighting Bitcoin’s struggle to maintain momentum above key resistance levels. His warning carries additional weight coming just before the pivotal Fed meeting, potentially adding substance to bearish arguments about Bitcoin’s near-term prospects.

Technical analysts also note several concerning signals:

Resistance Confluence: Multiple resistance levels converge between $116,000-$118,000, creating a significant hurdle for continued upward movement.

Overbought Conditions: Some momentum indicators suggest Bitcoin may be approaching overbought territory on shorter timeframes.

Correlation Risk: If traditional markets react negatively to Fed policy or economic data, Bitcoin could face correlated selling pressure.

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CryptoQuant Data: Mixed Signals in Bull Market Indicators

Despite the overall bullish narrative, CryptoQuant data reveals that eight of ten bull market indicators have turned bearish, signaling potential waning momentum in the current rally phase. This divergence between price action and on-chain metrics presents a more nuanced picture of market health.

The bearish indicators include:

Exchange Flows: Increased Bitcoin flows to exchanges suggest potential selling pressure preparation.

Long-Term Holder Behavior: Some long-term holders appear to be reducing positions at current price levels.

Derivatives Markets: Futures positioning and options flow suggest more defensive positioning among sophisticated traders.

However, bullish on-chain metrics persist:

Whale Accumulation: Large wallet addresses continue accumulating Bitcoin, with holdings at near-record levels.

Network Activity: Transaction volume and network utilization remain robust, indicating continued fundamental usage.

Supply Dynamics: Exchange reserves continue declining, suggesting reduced available supply for immediate selling.

Global Economic Context: Beyond Fed Policy

Bitcoin’s price action occurs within a broader global economic context that extends beyond U.S. Federal Reserve policy. Several international factors could influence cryptocurrency markets:

Dollar Strength: Fed rate cuts typically weaken the U.S. dollar, which historically benefits Bitcoin and other dollar-denominated assets.

Geopolitical Tensions: Ongoing global uncertainties continue to support Bitcoin’s narrative as a hedge against traditional financial system risks.

Regulatory Environment: Evolving regulatory frameworks globally continue to shape institutional adoption and market structure.

The interconnected nature of global financial markets means that Fed policy changes can have cascading effects across multiple asset classes and geographic regions, potentially amplifying Bitcoin’s response to monetary policy shifts.

Market Structure Evolution: ETFs and Institutional Infrastructure

The cryptocurrency market structure has evolved significantly since Bitcoin’s last major rally cycle, with the introduction of spot Bitcoin ETFs creating new dynamics for price discovery and institutional participation. These products have facilitated billions in capital flows and created more direct connections between traditional finance and cryptocurrency markets.

ETF trading patterns suggest institutional investors are positioning for potential Fed-driven moves, with significant flows occurring ahead of major policy announcements. This institutional involvement may reduce volatility during policy transitions while potentially amplifying longer-term trends.

Options and Derivatives Activity

The derivatives market provides additional insight into trader positioning and expectations. Options activity shows significant interest in both near-term moves around the Fed decision and longer-term upside exposure extending into Q4 2025.

Put/Call Ratios: Current positioning suggests more optimistic than pessimistic bets on Bitcoin’s direction following Fed policy changes.

Volatility Expectations: Implied volatility levels indicate markets are prepared for significant moves but not extreme dislocations.

Term Structure: The curve suggests expectations for increased volatility in the immediate term followed by stabilization at higher price levels.

Critical Price Levels and Trading Strategy

For traders and investors monitoring Bitcoin’s price action around the Fed decision, several critical levels merit attention:

Immediate Resistance: $116,400-$117,000 represents the most significant near-term hurdle, with a decisive break above potentially triggering momentum-based buying.

Support Zones: $115,000-$115,850 provides immediate support, while $113,500 represents the next significant level if initial support fails.

Breakout Targets: A successful move above $118,000 could open the path toward $120,000-$125,000, where longer-term resistance levels converge.

Trading volume and momentum indicators around these levels will be crucial for determining whether moves represent genuine breakouts or false signals.

Risk Management Considerations

The high-stakes nature of the Fed decision requires careful risk management for cryptocurrency traders and investors:

Volatility Preparation: Bitcoin could experience significant intraday volatility regardless of the Fed’s decision, requiring appropriate position sizing.

Time Decay: Options and leveraged positions face time decay risks if Bitcoin remains range-bound following initial policy reactions.

Correlation Risks: Strong correlations with traditional risk assets mean Bitcoin could face selling pressure if broader markets react negatively to Fed policy or economic data.

Looking Ahead: Q4 2025 Catalysts

Beyond the immediate Fed decision, several factors could influence Bitcoin’s trajectory through the final quarter of 2025:

Additional Fed Meetings: October and December FOMC meetings could provide additional policy accommodation if economic conditions warrant further rate cuts.

Seasonal Patterns: Q4 has historically been Bitcoin’s strongest quarter, with October particularly favorable for cryptocurrency performance.

Year-End Positioning: Institutional portfolio rebalancing and tax considerations could create additional buying or selling pressure.

Regulatory Developments: Continued evolution of cryptocurrency regulation globally may impact market structure and institutional participation.

Conclusion: Pivotal Moment for Digital Assets

As Bitcoin consolidates above $116,000 ahead of the Federal Reserve’s September 17 decision, the cryptocurrency market finds itself at a pivotal juncture. The combination of favorable technical indicators, strong institutional interest, and expectations for more accommodative monetary policy creates a potentially explosive setup for digital assets.

However, the complexity of current market dynamics—including seasonal headwinds, technical resistance levels, and mixed on-chain signals—suggests that traders should prepare for multiple scenarios. While the base case appears increasingly bullish, particularly if the Fed delivers expected rate cuts and signals additional accommodation ahead, the possibility of disappointing policy guidance or unexpected economic developments requires careful risk management.

The next 48-72 hours will likely prove decisive for Bitcoin’s direction through the remainder of 2025, with Wednesday’s Fed decision serving as the primary catalyst for either confirming the bullish breakout scenario or triggering a more significant corrective phase.

Key factors to monitor include:

• Fed Statement Language: Specific wording about future policy direction and economic assessment
• Powell’s Press Conference: Tone and guidance regarding the pace of future cuts
• Market Reaction: How both traditional and cryptocurrency markets respond to policy changes
• Volume Confirmation: Whether any price moves are accompanied by supporting volume
• Technical Follow-Through: Bitcoin’s ability to maintain levels above or below key technical zones

For the cryptocurrency market as a whole, this Fed decision represents not just another policy announcement but potentially a regime change that could unlock significant capital flows into digital assets. The outcome will likely influence not only Bitcoin’s near-term price action but also the broader trajectory of cryptocurrency adoption and institutional participation through the remainder of the decade.

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By: Montel Kamau

Serrari Financial Analyst

16th September, 2025