Bitcoin (BTC) traded between $87,000 and $88,000 Tuesday ahead of the Federal Reserve's interest rate announcement scheduled for Wednesday afternoon.
Market participants expect continued rangebound trading with elevated volatility later this week.
The Federal Open Market Committee will announce its rate decision at 2:00 PM ET January 28 followed by Chair Jerome Powell's press conference at 2:30 PM.
CME Group's FedWatch Tool shows less than 3% probability of a rate cut.
Bitcoin recorded modest volatility during Tuesday's US trading session with a brief move to $88,315 before retracing lower. The cryptocurrency has consolidated in a tight range for two weeks providing little directional momentum.
Fed Meeting Creates Uncertainty for Risk Assets
Powell faces pressure from the Trump administration to reduce interest rates despite persistent inflation concerns. Multiple Fed officials including Minneapolis President Neel Kashkari have stated it remains "way too soon" to resume rate cuts.
Cryptocurrency markets historically show heightened volatility around Federal Reserve decisions. A hawkish tone from Powell could pressure Bitcoin below recent support near $85,000 while dovish guidance might drive a rally toward $100,000.
JPMorgan analysts predicted earlier this month that the Fed's next rate move will be an increase rather than a cut.
The bank projects rates will hold steady through 2026 with a potential 25 basis point hike in third quarter 2027.
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Technical Analysts Predict Near-Term Volatility
Multiple analysts using various technical frameworks anticipate increased price swings this week. Some technical analysis models suggest Bitcoin could test levels below current support zones though these projections remain speculative.
Bitcoin's Bollinger Bands have compressed to their narrowest range since July indicating low volatility that historically precedes larger directional moves. However the direction of any breakout remains unclear based solely on technical indicators.
[Gold began testing $5,000](Gold Tops $5K, Beating US Treasuries And Bitcoin As The Safe Haven Of Choice) as support Tuesday while US equity indices opened slightly higher.
Traditional risk assets showed muted volatility ahead of the Fed decision as traders avoided taking large positions before policy clarity.
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