Bitcoin is currently trading at $76,690.82, down 3% in morning trading, as investors exercise caution ahead of the upcoming rate decision and key data releases. The market maker Enflux notes that traders are hesitant to drive bitcoin's price higher due to the uncertainty surrounding the Fed's decision and the potential impact of oil prices on inflation.
With Brent crude remaining above $100, the outlook for inflation is complicated, making it challenging for the Fed to adopt a dovish stance. Enflux suggests that the market is operating under two conflicting assumptions: that geopolitical tensions will eventually ease, but not quickly enough to influence near-term policy, resulting in a more ambiguous environment for risk assets.
As a result, bitcoin has struggled to break above key technical levels, trading roughly 4% below its short-term holder cost basis. A clear signal from the Fed that oil-driven inflation is temporary would be necessary for bitcoin to move decisively above this level.
Meanwhile, a potential slowdown in AI demand, as reported by The Wall Street Journal, could have a significant impact on bitcoin's price in the long term. Listed BTC mining companies have taken on significant debt to pivot to hosting AI data centers, and a slowdown in this pivot could lead to reduced selling pressure. However, the timing of this relief is uncertain, and the market is likely to remain stuck between competing macro forces, with any slowdown in AI demand adding another layer of uncertainty without immediately resolving the key issues affecting price.