Bitcoin Hovers Below $85,000 Ahead of FOMC Meeting

Bitcoin has been trading below $85,000 for a week ahead of the Federal Open Market Committee (FOMC) meeting scheduled for March 19. Analysts are divided on whether the cryptocurrency will recover, with some predicting a potential bounce back and others warning of a bear market.

Charles Edwards, Co-Founder of crypto VC Capriole Investments, suggests that Bitcoin could recover due to a potential bottom in U.S. liquidity. He notes that the current cycle has been characterized by a flat monetary cycle, unlike the strong uptrend seen in the previous cycle. Edwards believes that the first signs of a major multi-year bottom in U.S. liquidity are emerging, which could be positive for Bitcoin.

Edwards also points out that the U.S. has been experiencing quantitative tightening (QT) for four years, which caps U.S. liquidity and is the opposite of quantitative easing (QE). Increased U.S. liquidity typically implies more money circulation and is historically positive for risk assets, including Bitcoin. However, such a macro shift depends on the outcome of the upcoming FOMC meeting.

Markets have priced in a zero-interest rate cut at the next FOMC meeting, but analysts will be closely watching Fed Chair Jerome Powell’s press conference for clues on QT and any sentiment shifts. Coinbase analysts project a good chance that the Fed could pause QT at the meeting, as bank reserve levels are approaching the 10-11% of GDP threshold considered sufficient for maintaining financial stability.

Renowned trader Cryp Nuevo expects a potential bounce from the short-term trendline support driven by a liquidity hunt at $85,000-$87,000 around the FOMC meeting. However, some on-chain indicators suggest caution. Bitfinex analysts note that Bitcoin ETF demand is too weak to boost a strong recovery, with ongoing outflows from U.S. spot Bitcoin ETFs totaling $921.4 million last week.

CryptoQuant founder Ki Young Ju also warns of a bear market, citing weak ETF flows and a lack of new liquidity. He points out that massive volume around $100,000 failed to push the price higher, and ETF inflows have been negative for three consecutive weeks. Realized cap-based indicators show a lack of new liquidity, further supporting the bearish outlook.