Bitcoin Drops 3.8% Ahead of FOMC Meeting

Bitcoin's price experienced a decline at the start of the week, dropping from $84,500 on March 17 to $81,300. This downward trend was likely influenced by the Federal Open Market Committee’s (FOMC) two-day meeting scheduled for March 18-19. FOMC meetings are known to act as market resets, causing crypto markets to brace for potential impacts. Traders typically de-risk and reduce leverage ahead of these meetings, and the markets can be equally reactive after the meeting and press conference from the Federal Reserve Chair.

The press release of the current FOMC meeting, scheduled for Wednesday, March 19, at 2:30 pm ET, could trigger major movements in the Bitcoin market. Analyzing market behavior leading up to its release could offer clues about Bitcoin’s next move. Traders are closely monitoring the FOMC minutes for any shifts in the Fed’s stance on inflation and interest rates. Historically, Bitcoin price tends to react sharply after the FOMC announcement. Since the beginning of 2024, BTC prices mostly declined after the FOMC decided to maintain rates, with notable exceptions being the pre-halving rally of February 2024 and the launches of the first spot BTC ETFs. When US interest rates were cut on September 18, 2024, and November 7, 2024, Bitcoin rallied. However, the third cut on December 18, 2024, did not yield the same result, marking the local Bitcoin price top at $108,000.

A key indicator of market sentiment is Bitcoin open interest—the total number of derivative contracts that have not been settled. Historically, Bitcoin open interest falls before FOMC meetings, showing that traders are reducing leverage and risk exposure. However, this month, a different pattern has emerged. Despite Bitcoin’s $12 billion open interest shakeout earlier this month, there was no noticeable decrease in Bitcoin’s open interest in the days preceding the FOMC. This could indicate a strong directional bet or that traders feel less anxiety about the Fed’s decision, possibly expecting a neutral outcome. Supporting this view, the probability that the Fed will maintain rates at 4.25%–4.50% is high. If the rates remain unchanged, it is possible that Bitcoin price will continue its current downtrend.

Unlike Bitcoin whales, investors in the spot Bitcoin ETFs have historically offloaded BTC holdings before FOMC meetings. Since the spot BTC ETFs launched in January 2024, most FOMC events have coincided with ETF outflows or, at best, modest inflows. The notable exception was the previous all-time high of January 2025, when even the spot Bitcoin ETF investors couldn’t resist the urge to buy. On March 17, the spot Bitcoin ETFs saw $275 million in net inflows, marking a shift from a month of outflows. This may signal a shift in investor sentiment and expectations regarding the Fed’s policy decisions. If spot ETF inflows are rising before the FOMC, investors might be anticipating a more dovish stance from the Fed, such as signaling future rate cuts or maintaining liquidity-friendly policies. Investors could also be loading up on Bitcoin as a hedge against uncertainty, suggesting that some institutional investors believe Bitcoin will perform well regardless of the Fed’s decision. Investors could also be anticipating a possible short squeeze. If traders were expecting Bitcoin to drop and positioned short, a sudden increase in ETF inflows could play a role in traders’ behaviors and trigger a short squeeze.

Following the FOMC, BTC’s price action, along with onchain data and spot ETF flows will show whether the recent activity was part of a long-term accumulation trend or just speculative positioning. Many traders agree that BTC could experience a significant price movement after the FOMC announcement. Even without rate cuts, the chance of the Fed issuing dovish statements could lift markets, while the absence of them could drive prices lower. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.