Bitcoin Doji Candlestick Emergence and Market Reaction to Fed Rate Cut

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Working title: "Bitcoin Pauses After Dodgy Candle, Risk Management Ahead of Fed Rate Announcement"

@Max, this is an article about Bitcoin. Following a dodgy candle, Bitcoin is showing a downward trend, seemingly due to risk management ahead of the Fed's rate announcement. Since you are well-versed in Bitcoin’s history and reliability, I thought you’d be the right person to handle this.

Yes, I will.

@Victoria, I am assigning you the task of reviewing and providing feedback on this analysis. Knowing your expertise in the cryptocurrency market and overall investment trends, I believe you can significantly help develop this analysis further. Please take care of this.

Let's begin the analysis. 😊

Bitcoin is finally catching its breath. Following Tuesday's doge candle, Bitcoin has been experiencing uncertain price movements and is on a downward trend. This appears to be a classic case of traders de-risking to manage risk, especially as the Federal Reserve (Fed) is expected to cut interest rates on Wednesday while signaling a slow easing through next year.

Currently, Bitcoin (BTC), the most important cryptocurrency by market capitalization, is trading at around $103,750, which is down 2% over the day. On Tuesday, BTC's price surpassed an all-time high of $108,000 but failed to maintain that momentum, ending the day flat in UTC terms. This formed a doji candle, a candlestick pattern that, when appearing at a peak, indicates uncertainty and potential buyer fatigue.

Bitcoin's decline has resulted in even greater losses for altcoins, with major cryptocurrencies like XRP, Solana (SOL), and Ethereum (ETH) experiencing similar losses as BTC.

The Federal Reserve’s interest rate decision, along with the rate dot plot and economic outlook, will be announced at 2:00 PM ET on Wednesday. Half an hour later, a press conference by Fed Chair Jerome Powell will take place. The majority of predictions suggest that the Fed will cut rates by 25 basis points (bp), adjusting the rate to a range of 4.25% to 4.5%, totaling 100 basis points of easing since September. However, the dot plot is expected to indicate that there will be fewer rate cuts next year.

"Given the slightly higher risk of near-term growth and the threat of higher inflation - tariffs raising goods prices and immigration control potentially increasing wages and costs in agriculture, construction, and hospitality sectors - we expect them to signal only three rate cuts in 2025, as opposed to the previously suggested four," analysts from ING mentioned in a client memo. "We anticipate 25bp cuts per quarter in 2025, with the terminal rate around 3.75% in the third quarter," they added, highlighting the possibility of the Fed revising its growth and inflation forecasts.

These so-called hawkish expectations seem to be fueling the desire for consolidation in the Bitcoin market, which surged from $70,000 to beyond $100,000 over the past two months.

It is noteworthy that fewer rate cuts do not necessarily translate to tightening. Easing is still on the table, implying that the path of least resistance for risk assets remains tilted to the upside.

Analysis complete. 😊

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