As the week commenced, Bitcoin (BTC) faced considerable selling pressure, which resulted in a price drop from $84,500 on March 17 to $81,300 at the time of this analysis. This decline appears to be a response to the impending Federal Open Market Committee (FOMC) meeting set for March 18-19, a period widely regarded in trading circles as one of volatility due to shifts in monetary policy.
FOMC meetings have historically acted as inflection points for the markets. Traders typically look to these gatherings for insights into the Federal Reserve’s stance on interest rates and inflation. It is common for market participants to reduce their positions and leverage in anticipation of the FOMC’s announcements. The post-meeting reactions can also be swift and significant, often influenced by the remarks of Federal Reserve Chair Jerome Powell during the meeting’s press conference.
The upcoming press release from the FOMC is scheduled for March 19 at 2:30 PM ET, and market observers anticipate that it could lead to notable movements in Bitcoin’s price. Understanding how the market has behaved in the lead-up to such announcements can provide valuable clues as to Bitcoin’s potential direction following the meeting.
Volatility Before the FOMC: A Historical Perspective
Traders are paying close attention to the minutes from the FOMC meetings for any signals related to the Fed’s policies on inflation and interest rates. Typically, Bitcoin’s price experiences sharp fluctuations following the FOMC announcements. Cumulative data since the start of 2024 suggests that Bitcoin often declines after the Fed decides to maintain interest rates.
An exception to this trend was observed during the pre-halving rally in February 2024, which coincided with the introduction of the first spot Bitcoin ETFs. In contrast, when the FOMC cut interest rates on September 18, 2024, and November 7, 2024, Bitcoin’s price surged. However, a subsequent rate cut on December 18, 2024, which saw a modest decrease of 25 basis points, did not yield the anticipated bullish outcome; Bitcoin peaked locally at $108,000 for a brief period following that announcement.
Open Interest Analysis: A Shift in Sentiment
One key barometer that can shed light on market sentiment is Bitcoin’s open interest, which reflects the total number of unsettled derivative contracts, predominantly perpetual futures. Historically, Bitcoin’s open interest tends to decline in anticipation of FOMC meetings, indicating that traders are diminishing their leverage and overall risk exposure.
However, a deviation from this pattern has emerged this month. Despite a significant open interest shakeout earlier in March, which saw a reduction of around $12 billion, Bitcoin open interest remained stable leading up to the FOMC meeting, even as its price declined. This divergence suggests that some traders may be taking a strong directional bet, signaling less anxiety surrounding the Fed’s decisions compared to prior meetings. Supporting this viewpoint, the CME Group’s FedWatch tool indicates a striking 99% probability that the Federal Reserve will keep rates steady within the 4.25% to 4.50% range.
If the Fed maintains its current rates, it’s plausible that Bitcoin could continue its recent downward trajectory. This expectation aligns with a notable position taken by a prominent trading whale, who opened a massive short position—leveraged 40x—valued over $500 million, although this position has since been closed.
ETF Dynamics: Spot Bitcoin ETFs and Investor Sentiment
Different from the whales’ behavior, investors in spot Bitcoin ETFs have a history of liquidating their Bitcoin holdings in advance of FOMC meetings. Since the introduction of spot bitcoin ETFs in January 2024, data shows that most FOMC events have aligned with outflows from these funds. The exception to this has been observed during the all-time high in January 2025, when even ETF investors found it hard to resist the allure of buying Bitcoin.
Remarkably, on March 17, the spot Bitcoin ETFs recorded a net inflow of $275 million, reversing a month-long trend of outflows. This shift may indicate a change in investor sentiment and anticipation of the Fed’s policy directions. Rising inflows into these ETFs could suggest a belief among investors that the Federal Reserve might take a more dovish approach—potentially hinting at future rate cuts or a continuation of liquidity-friendly policies.
Additionally, this uptick in ETF inflows may act as a hedge against uncertainty. Some institutional investors may be positioning themselves for a positive performance by Bitcoin, irrespective of the Fed’s decisions. There is also speculation that an increase in ETF inflows might trigger a short squeeze if many traders are wrongly positioned for a price decline.
Looking Ahead: The Post-FOMC Landscape
Following the FOMC announcement, the BTC price trajectory, combined with insights from on-chain data and the movements of spot ETF flows, will offer a clearer picture of whether recent trading activities are indicative of a long-term accumulation trend or merely speculative maneuvers.
Many traders are currently awaiting potential significant price movements in the wake of the FOMC’s announcements. As highlighted by crypto trader Master of Crypto in a recent social media post, the market is primed for change: “The FOMC is tomorrow, and a Big Move is expected.”
An absence of rate cuts or a failure to deliver dovish statements could conversely push prices lower. Overall, the coming days will be critical in shaping Bitcoin’s market direction and investor expectations, as the culmination of these events continues to unfold.
In conclusion, navigating the volatile waters of Bitcoin trading requires a keen understanding of the broader economic indicators, particularly those associated with the Federal Reserve’s monetary policies. Keeping a close watch on market dynamics and sentiment, including open interest trends and ETF flows, will be essential for making informed trading decisions in these uncertain times.