Fed’s divided rate decision threatens Bitcoin’s comeback as December hike looms
The Federal Reserve held interest rates steady at 3.75% to 4% on Oct. 28 on a 10-2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of an immediate hike, as Bitcoin fluctuated around $81,000.
The Federal Reserve maintained its target range at 3.75% to 4% on October 28, with a 10-2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring an immediate quarter-point increase. Rate-market trackers currently estimate an 83-88% probability of a December rate hike, while the market had anticipated a hold before the meeting.
Bitcoin's price reacted to the decision, dipping to $80,500 before recovering above $81,000. This brings the cryptocurrency within reach of the approximately $81,500 aggregate cost basis of US spot Bitcoin ETFs, as estimated by Glassnode.
Hawkish Hold Signals
The Federal Reserve described economic growth as strong and reiterated its commitment to returning inflation to the 2% target. At his press conference, Chair Kevin Warsh acknowledged that credit conditions had tightened and higher rates were affecting technology investment, including AI, though he declined to characterize overall financial conditions as tight.
The 10-year Treasury yield stood near 5.04% on decision day, while the two-year yield was approximately 4.78%. The University of Michigan's final October sentiment index came in at 48, indicating persistent consumer caution.
A hawkish hold is what the market expected, with no change for October and a 25bps hike for December priced in. Thursday's PCE, a key decision variable for the Fed, being released just one day after the Fed decision, will be used as a timely decision validation.
Bitcoin's Technical Test
Glassnode's October 28 report revealed that long-term holders control approximately 4 million Bitcoin acquired between $85,000 and $118,000, representing potential supply as prices recover. These coins are separate from active sell orders, as holders at breakeven decide whether to sell.
Bitcoin has repeatedly encountered resistance around the $84,000 to $85,000 range. Since the October 24 decline, about $3.4 million of Binance bids remained at $80,000, with the largest cluster sitting at $78,000 to $79,000 with approximately $42 million.
The True Market Mean sits near $77,900 and the short-term holder cost basis near $75,800. Matt Mena of 21shares identifies $80,000 as key support, with a break potentially exposing $77,000 to $78,000 and then $75,800.
Reclaiming $81,000-$82,000, where the 50-day moving average and ETF cost basis converge, would open the door to $84,000-$85,000, followed by $87,000-$87,500.
Market Dynamics
On-chain data from October 22 showed approximately $3.7 billion in realized profit and $1.4 billion in realized loss, with Glassnode attributing much of the spike to transfers between wallets of the same entity. Entity-adjusted profit-taking ran near $260 million daily, about half its September peak.
The largest daily net realized loss around October 24 was about $27 million, compared to roughly $630 million at the August low. Wallets holding 100 to 1,000 Bitcoin were October's most persistent accumulators, while the 30-day realized volatility sits near 25%, below about 95% of readings since 2015.
Farside Investors reports spot Bitcoin ETF net flows of negative $487.2 million between October 22 and 27, indicating continued outflows despite the price stabilization.
What's Priced In
Market models suggest that about 21.75 basis points of a potential December hike are already embedded in expected policy, with 87% probability assigned to a 25-basis-point increase. A drop to 50% probability would remove about 9.25 basis points, while a rise to 95% would add approximately 2 basis points.
Brendan Ma of the Arbitrum Foundation interprets the Fed's hold with two dissents as keeping December options open, with most expectations already priced in. He notes that tokenized stocks have risen around 12% over the past month while tokenized Treasuries have shrunk, even with the 10-year yield near 5%.
Capital on-chain is moving to where it can be used, not just where it's paid to wait.
Path Forward
If upcoming PCE, GDP, and November 6 payroll data show softer inflation expectations, Treasury yields ease, and ETF inflows resume, Bitcoin could break through $81,500 and sustain closes above $85,000. The next technical target would be $87,000 to $87,500, where overhead supply thickens.
With 30-day volatility near 25%, Bitcoin's one-standard-deviation range through December 9 would be approximately $74,100 to $87,900 from current levels around $81,000. Conversely, if inflation surprises higher, Treasury yields climb, and ETF withdrawals persist, a close below $78,000 to $79,000 support would expose $75,800.
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