Bitcoin Attempts to Make $62,000 a New Support Level Amidst Fed's Rate Cut

BTC/USD 4-hour chart. Source: TradingView

Bitcoin (BTC) price surged to three-week highs on Sept. 19 as the United States Federal Reserve implemented a major rate cut.

BTC/USD 4-hour chart. Source: TradingView

BTC price three-week highs as Fed begins cutting rates

Fresh from the U.S. Federal Reserve’s decision to cut interest rates by 0.5%, Bitcoin aimed to recapture the $62,000 support level on Sept. 19.

According to Cointelegraph Markets Pro and TradingView, BTC/USD rose to local highs of $62,600 during the Asia trading session. The move came shortly after the Fed action, which marked only the third time in history that a rate-cutting cycle began with such a substantial reduction.

Short positions liquidated

Data from monitoring resource CoinGlass showed that the bullish run liquidated short BTC positions across various exchange order books to the tune of $128 million in the 24 hours leading up to the time of writing.

“Now we need to reduce leverage or take profits,” advised analysts on X, cautioning investors not to “get carried away.”

BTC liquidation heatmap (screenshot). Source: CoinGlass

Bullish prediction: Aiming for $64,000

Earlier predictions had suggested that Bitcoin could reach $64,000 following a 0.5% rate cut, but resistance at higher levels remained.

“Bitcoin slowly eating its way through the resistance level,” noted trader Jelle on X in his latest BTC analysis.

“Above $62,500, things will look a lot more constructive, and stops above $65,000 won’t be safe anymore. Going to be an interesting end to September.”

US dollar shows volatility

The U.S. Dollar Index (DXY) saw significant fluctuations, initially rising before falling back to previous support levels.

“Sitting at the edge of support. Breakdown can result in a sharp move towards 96,” commented trader Aksel Kibar in his latest DXY analysis on X.

Yen rate decision in focus

For Arthur Hayes, former CEO of crypto exchange BitMEX, attention now shifts to the Bank of Japan’s rate decision, which is expected on Sept. 20. The strength of the yen could potentially influence BTC price movements.

“Something doesn’t add up”

Despite the Fed’s aggressive rate cuts, trading resource The Kobeissi Letter warned traders to remain cautious.

Historical precedents indicate that such significant rate cuts often come before poor performance in U.S. equities.

“In 2001, the market fell 31% after 2 years and in 2007 the market fell 26% after 2 years. These were major crises,” an X thread pointed out.

Related: Markets see 0.5% Fed rate cut — 5 Things to know in Bitcoin this week

Contrast between Fed’s messaging and actions

Kobeissi found a contradiction in the Fed’s optimistic messaging and the scale of its rate cut, questioning why the central bank would begin with a 50-basis point reduction if the economy were strong.

“If the Fed has only started with 50 basis point rate cuts during crises, why start with 50 bps this time?”

Fed target rate probabilities. Source: CME Group

FedWatch Tool: Future rate cuts seen as 25 bps

Data from CME Group’s FedWatch Tool showed that the likelihood of another 0.5% cut was slimmer compared to a 0.25% reduction at the next Fed meeting, which is scheduled for Nov. 7.

This article does not contain investment advice or recommendations. Every investment and trading move carries a risk, and readers should conduct their own research when making a decision.