Bitcoin’s rise above $92,000 has sparked new optimism among market watchers who now believe this week’s Federal Reserve meeting could trigger a much larger rally.
Key takeaways:
- Analysts say a Federal Reserve-driven liquidity surge could send Bitcoin up sharply after surpassing $92,000.
- London Crypto Club expects a “moderate surprise” with rate cuts and balance sheet expansion acting as important catalysts.
- A 25 basis point cut is widely anticipated by markets, and lower rates have historically driven greater demand for risk assets like Bitcoin.
Analysts at the London Crypto Club say a liquidity boost by the Federal Reserve on Wednesday could act as a powerful catalyst, potentially driving the world’s largest cryptocurrency “much higher.”
Fed Prepares for ‘Moderate Surprise’ as Analysts Warn Liquidity Wave Is Coming
In their latest note, David Brickell and Chris Mills argue that the central bank is about to deliver a “mild surprise” by forecasting that authorities will inject liquidity through a creative bond-buying mechanism rather than explicit quantitative easing.
“We are entering a continuing cycle of rate cuts accompanied by balance sheet expansion as the Fed effectively turns to money printers to monetize the deficit,” they wrote.
“That’s a powerful, structural tide to swim against in the new year.”
The development comes at a tense time for cryptocurrency traders. Bitcoin’s recent break above $92,000 comes after two months of turbulence that erased nearly all of the year’s gains, leaving investors eager for a clear macro signal that could restore market direction.
The Federal Open Market Committee’s decision dominates this week’s macroeconomic calendar.
“Policymakers are almost universally expected to cut rates by 25 basis points for the third time this year,” said Ed Yardeni of Yardeni Research, echoing broad market expectations.
The CME FedWatch tool shows an 86% probability of a quarter-point cut, while the Polymarket prediction market puts the odds even higher at 94%.
Lower interest rates have historically benefited risk assets like Bitcoin by reducing the attractiveness of bonds and increasing the flow of capital into higher-yielding or speculative markets.
Bitcoin tests key Fibonacci support
As reported, Bitcoin is trading at a fundamental level that analysts say could determine whether the market maintains its broader uptrend or pulls back toward spring lows.
Cryptocurrency trader Daan Crypto Trades said the 0.382 Fibonacci retracement zone is the line bulls need to defend, warning that a breakout could send BTC back to April levels near $76,000.
“It’s also pretty much the last major support before retesting the April lows, which would break this temporary market structure,” he said.
Meanwhile, a key on-chain indicator known as “liveness” is rising again, even as Bitcoin price action remains subdued.
Analysts say the divergence suggests renewed underlying demand, with dormant currencies moving to levels not seen in years, a sign that long-term holders may be re-entering the market.
Last week, Bitfinex said the market is showing “seller exhaustion” following a period of heavy deleveraging and panic-driven outflows by short-term holders.
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