Bitcoin experienced a notable shift following the Federal Reserve's recent decision regarding interest rates, coupled with a significant change in the Coinbase Premium Index. The U.S. Federal Reserve decided to maintain its benchmark interest rate within the target range of 4.25% to 4.5%. While many anticipated no change, some analysts believed that even a slight rate reduction could decrease the appeal of fixed income investments, potentially driving capital towards assets like Bitcoin. However, two Fed governors dissented from the majority, favoring a rate cut of 0.25 percentage points.
Currently, futures markets indicate a 68% chance that the Fed will lower rates by at least 25 basis points at the September meeting and a 65% chance of a similar cut in December. The Fed's assessment of the economy acknowledged moderated growth in the first half of the year, while inflation remained "somewhat elevated," still exceeding the Fed's 2% target.
In light of these factors, Bitcoin has been trading steadily, with analysts suggesting that U.S. regulatory signals may support Bitcoin, holding it near $116,000 as it gathers momentum to potentially surpass all-time highs. Before the Fed's policy meeting, Bitcoin hovered around $118,000.
Adding another layer to this situation is the Coinbase Premium Index, which has turned negative for the first time since May 29, concluding a 62-day period of positive values. This index monitors the price difference between the BTC/USD pair on Coinbase and the BTC/USDT pair on Binance, serving as an indicator of U.S. spot demand. A positive premium suggests higher buying pressure from U.S. investors, particularly institutional entities, compared to the global user base on Binance. The recent shift to a negative premium may indicate a decrease in appetite from U.S. buyers.
Despite the negative Coinbase Premium Index, Bitcoin has remained above $115,000, implying that larger, passive buyers are intervening to absorb the selling pressure. The Bitcoin Binary Coin Days Destroyed (CDD) has also spiked, suggesting that long-term holders are selling their coins.
Analysts note that Bitcoin's price has been stabilizing between $116,000 and $120,000 for roughly two weeks. Strategy (MSTR) recently added 21,021 BTC, and U.S. spot Bitcoin ETFs experienced net inflows, indicating robust institutional demand. The futures funding rate remains neutral, suggesting balanced leverage and the potential for a significant move.
On the technical front, Bitcoin is consolidating near $118,000 within a bull pennant pattern, potentially targeting a breakout toward $132,000-$135,000. A breakout above the pennant's upper trendline, around $120,000, could confirm a bullish continuation towards the projected target. The daily Relative Strength Index (RSI) also suggests room for further upside.
Overall, while the Federal Reserve's decision to hold interest rates steady and the shift in the Coinbase Premium Index have introduced some uncertainty, Bitcoin's price remains relatively stable. Strong institutional demand, positive technical indicators, and the potential for a Fed pivot toward easing monetary policy could create favorable conditions for Bitcoin in the coming months.
