Bitcoin's price has decreased significantly in anticipation of decisions from the US Federal Open Market Committee (FOMC), as historically FOMC meetings trigger notable volatility in cryptocurrency markets.
The Connection Between FOMC Meetings and Market Volatility
Federal Open Market Committee (FOMC) meetings are traditionally market 'reset' moments. Each time the FOMC convenes to deliberate on US monetary policy, crypto markets brace for impact. Historically, traders tend to de-risk and reduce leverage ahead of the announcement. Yet, after the press conference with the Federal Reserve Chair, Jerome Powell, markets can react in varying ways.
Open Interest Dynamics Before FOMC Meetings
A key indicator of market sentiment is Bitcoin open interest — the total number of derivative contracts, mainly perpetual futures, that remain unsettled. Historically, Bitcoin open interest declines before FOMC meetings, indicating that traders reduce leverage and risk exposure. This month, however, there was no noticeable decrease in open interest, suggesting traders might be confident in a neutral FOMC outcome.
Spot Bitcoin ETF Reactions
Investors in spot Bitcoin ETFs typically unload assets before FOMC meetings. Since the launch of the ETFs in January 2024, most FOMC events have led to ETF outflows. However, just before the current meeting, there was a net inflow of $275 million, indicating a potential shift in investor expectations regarding the Fed's policy decisions.
FOMC meetings continue to significantly impact Bitcoin and the broader cryptocurrency market. Whether the current volatility signals longer-term trends remains to be seen, but many traders anticipate substantial price movements following the current meeting.
