Fed Decision Looms Large Over Bitcoin's $65,000 Rebound

Bitcoin's recent rebound to $65,000 has been attributed to a temporary pause in US-Iran strikes and a relief rally. However, the upcoming Federal Reserve meeting on Wednesday could potentially turn this rebound into a trap for Bitcoin.

Data from CryptoSlate shows that Bitcoin rose by about 1% to $65,155, while Ethereum gained 4% to around $1,964, its highest level since early June. The move came as Washington temporarily halted its strikes on Iran and Tehran said it would suspend attacks as long as the United States did the same.

The Fed's decision is crucial for Bitcoin, as higher interest rates can reduce demand for assets without contractual yields. While some investors expect a 25-basis-point increase in interest rates, about two-thirds of the market still expects the Fed to keep its target range unchanged at 3.50% to 3.75%. However, the recent energy shock has changed expectations for US interest rates.

A hold paired with hawkish guidance could produce a similar repricing across rates markets as a quarter-point hike would. A less hawkish message from Chair Kevin Warsh would give the rebound more room to develop and potentially remove another obstacle for crypto and equities.