Bitcoin surges past 60K, will FOMC meeting and US politics cause more volatility?

Bitcoin surged to $61,337 on Tuesday, its largest intraday gain since early August, as speculation grew that the Federal Open Market Committee (FOMC) could cut interest rates by 50 basis points in its Wednesday meeting. The CME FedWatch Tool shows a 62.0% chance of a 50-basis-point cut, up from 50.0% a day earlier, while the odds of a smaller 25-basis-point cut are at 38.0%, according to FXStreet analyst Akhtar Faruqui.

A 25-basis-point cut would be the biggest surprise from the Fed since 2008, and a 50-basis-point cut would be the largest unexpected move since 2009, per Kobeissi Letter’s analysis. 

The Fed rate decision is vital because Bitcoin and other cryptocurrencies, like tech stocks, have historically benefited from low interest rates as "risk-on" assets, known for their volatility. This can be partly explained by the increasing correlation between Bitcoin and the S&P 500. 

According to K33 Research, the 30-day correlation between Bitcoin and the S&P 500 is now at levels not seen since October 2022. 

This means that cryptos have become increasingly sensitive to Fed policy, which is why the crypto market is why Wednesday's Fed decision could cause significant volatility for BTC. Lower rates typically boost cryptos like BTC by encouraging higher-risk, higher-reward opportunities. 

Beyond the fed rate decision, analysts foresee Bitcoin's volatility rising as the U.S. election approaches, with Kamala Harris and Donald Trump in a closely contested race.

Bitcoin price as we build up to US polls

Analysts foresee Former President Trump’s shift toward supporting the cryptocurrency sector could make Bitcoin prices more sensitive to his campaign’s progress. His team has actively targeted crypto enthusiasts, promising to turn the U.S. into the “crypto capital of the world.” If his campaign gains momentum, market optimism could lift Bitcoin, as investors view his policies as favourable for the industry. 

Trump's acceptance of crypto donations and pro-crypto stance has already fueled speculation of a “Trump trade,” where his electoral gains drive Bitcoin higher. However, the path to election day remains uncertain. Shifts in polling or debate performances could introduce short-term volatility, creating opportunities for traders.

On the other hand, Vice President Harris has yet to make her position on cryptocurrency explicitly clear, though her campaign has engaged with industry stakeholders. Harris’ presidency might be perceived as a continuation of the Biden administration’s cautious approach to crypto, which included tighter regulatory scrutiny. Her administration is expected to introduce anxiety among crypto investors, especially startups and smaller players in the market, who worry that further cryptocurrency regulation could slow innovation and limit the industry's growth.

However, concerns about a Harris presidency driving Bitcoin lower might be overstated. Some experts argue that Bitcoin’s global nature and increasing institutional adoption will ensure its resilience, regardless of who wins the election. With Harris showing signs of a more engaged stance toward crypto, there’s potential for clearer regulations, which could provide much-needed stability for the sector.

Market sentiment and technical outlook

In recent months, Bitcoin’s price has largely traded within a range of $55,000 to $70,000, with macroeconomic data and political news contributing to price swings. While the election cycle has added a new layer of complexity, Bitcoin’s price is still heavily influenced by broader economic trends such as inflation, interest rates, and institutional adoption.

The recent debate between Harris and Trump saw Bitcoin briefly dip by 3%, though this was more due to interest rate updates from Japan and U.S. inflation data rather than the debate itself. Investors continue to watch these macroeconomic factors as well as Fed moves, knowing that both the election and monetary policy will play significant roles in shaping Bitcoin’s path forward.

At the time of writing, BTCUSD is holding just above $60,000 with a bearish bias on the daily chart, as prices stay below the 100-day moving average. However, RSI rising past the midline indicates rising momentum, possibly hinting at a further move up. Buyers could encounter resistance around the $60,800 price level, with a further move up likely to hold around the $62,000 psychological level. On the downside, prices could find support at the $59,000 and $58,000 support levels.