Bitcoin soared to $94,625, reaching a three-week high as positive social sentiment returned, but comments from the Federal Reserve on Wednesday could potentially destabilize it again.
According to blockchain analytics firm Santiment, the price of Bitcoin surged on Tuesday in a 'much-needed rebound over the past three weeks', prompting traders to 'return to FOMO and anticipate higher prices'.
According to TradingView, on Tuesday's close, the price of Bitcoin surged to $94,625 on Coinbase, the highest since November 25.
Santiment states that this has led to a flood of calls for 'higher' and 'breakthrough' across various platforms.
However, it has begun to fall from that level, dropping to $92,400 as of this writing, leaving analysts wondering what will happen next.
“The market is moving in the opposite direction to the behavior of small traders,” Santiment said, noting that this appears to have occurred within hours of the monthly high.
Bitcoin volatility ahead of the Fed decision
Some analysts have warned that the recent rally could face challenges once the Federal Reserve meets on Wednesday.
According to CME Group futures market data, the Federal Reserve will announce its interest rate decision on Wednesday, with an 88.6% probability of a 0.25% rate cut.
BTSE exchange chief operating officer Jeff Mei told Cointelegraph, "Bitcoin may be rising due to expectations of an interest rate cut, but it's hard to predict what will happen after the Fed meeting tomorrow."
He warned that any hesitation in future rate cuts could be negative for Bitcoin and the crypto market. According to CME futures forecasts, the probability of another 0.25 percentage point rate cut in January is 21.6%.
"The risk lies in the possibility that the Fed's outlook may include hesitation to cut interest rates or further stimulate the economy in order to avoid triggering inflationary pressures. After the last Fed rate cut, prices subsequently plummeted."
Analyst Sykodelic said, "Any price action ahead of the FOMC is difficult to interpret because tomorrow [Wednesday] will be very volatile."
One Bitcoin investor believes the recent price movement is unusual.
Long-term Bitcoin investor "NoLimit" told his 53,000 followers on X that the move was "pure manipulation." He continued, saying that Bitcoin's sudden surge to $94,000 "doesn't look like a natural move at all."
"People are celebrating, but if you zoom in and look at it for 10 seconds, this move has all the characteristics of a classic manipulated rally."
"This is exactly how big players create FOMO so they can sell at a better price."
