Bitcoin is rising, extending its rebound above 64k as investors look cautiously towards the Federal Reserve interest rate decision later today and renewed U.S.-Iran hostilities lift oil prices by 5%, reviving inflation concerns.
Bitcoin is up 1.5% over the past 24 hours, recovering from yesterday’s low of 62.7K to trade around 64.3K at the time of writing. Major altcoins are also moving higher, with Ethereum up 2% over the same period, while the total crypto market capitalisation has risen 1.3% to $2.2 trillion.
However, sentiment remains cautious ahead of the Federal Open Market Committee interest rate decision at 18:00 GMT, which will be followed by Fed Chair Kevin Warsh’s press conference at 18:30 GMT.
The baseline expectation is for the Fed to leave interest rates unchanged at 3.5% to 3.75%. However, expectations have risen that policymakers could still deliver a surprise 25-basis-point rate hike or that Kevin Warsh could pave the way for a September move.
Fed funds futures remain unusually divided heading into the meeting, which raises the potential for market volatility after the decision. Markets are pricing in around a 35% probability of a 25-basis-point hike today and an 80% probability of a rate increase at the September meeting.
June CPI inflation, which cooled to 3.5% year-on-year, removes some urgency for the Fed to act immediately. However, crude oil prices have climbed back above $100 per barrel, up around 20% this month, while fresh import tariffs and sticky core inflation give policymakers reasons to keep a hawkish bias.
Focus will also be on Kevin Warsh’s post-meeting press conference, where investors will look for clues on the Fed’s policy outlook. Should Warsh highlight inflation risks and leave the door open to a September rate hike, Treasury yields and the dollar could rise at the expense of Bitcoin, gold and equities.
However, Warsh has also made clear his preference for limited forward guidance and shorter policy statements. As a result, investors may struggle to draw firm conclusions from today’s meeting.
In that scenario, assuming the Fed leaves rates unchanged, tomorrow’s Core PCE inflation report could provide greater direction for markets than the Fed meeting itself.
Institutional demand remains weak
Bitcoin ETFs recorded a fourth straight day of net outflows on Tuesday, with $50 million exiting BTC ETFs yesterday. The funds have shed a total of 3,170 BTC over the past seven days, highlighting weak institutional demand.
While Bitcoin ETFs have recovered around 3.3% of the $8.2 billion that left the sector during a two-month period of heavy outflows, inflows remain too weak to provide meaningful support for Bitcoin prices.
BTC spot trading volumes at 18-month low
July’s subdued trading activity is also continuing as Bitcoin consolidates within a narrow range. Spot and derivatives market activity remains muted, leaving July on track to record the lowest average daily Bitcoin spot trading volume since November 2023.
According to K33 Research, average daily spot trading volume across exchanges stood at $2.2 billion this month, while the seven-day average slipped to $2.1 billion, down 4% from the previous week.
Technically, Bitcoin continues to trade below its 50-day, 100-day and 200-day EMAs, keeping the broader technical outlook bearish.
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