Bitcoin price volatility ramps up around FOMC days — Will this time be different?

At the start of the week, Bitcoin (BTC) price succumbed to pressure from sellers, declining from $84,500 on March 17, to $81,300 at the time of writing. This downward movement was most likely a sell-off related to the Federal Open Market Committee’s (FOMC) two-day meeting, which takes place on March 18-19.

Federal Open Market Committee (FOMC) meetings tend to act as market resets. Each time the FOMC meets to deliberate on US monetary policy, crypto markets brace for impact.

Historically, traders de-risk and reduce leverage ahead of the announcement, and after the meeting and press conference from Federal Reserve Chair Jerome Powell the markets can be equally reactive.

The press release of the current FOMC meeting scheduled for Wednesday, March 19, at 2:30 pm ET, and it could trigger major movements in the Bitcoin market. Analyzing market behavior leading to its release could offer clues about Bitcoin’s next move. 

To traders, FOMC means volatility

Traders are closely monitoring the FOMC minutes for any shifts in the Fed’s stance on inflation and interest rates. 

After the FOMC announcement, Bitcoin price tends to react sharply. Since the beginning of 2024, BTC prices mostly declined after the FOMC decided to maintain rates, as can be seen on the chart below. 

The notable exception was the pre-halving rally of February 2024, which also coincided with the launch of the first spot BTC ETFs. When US interest rates were cut on September, 18, 2024 and November 7, 2024, Bitcoin rallied.

However, the third cut on December 18, 2024, did not yield the same result. The modest decrease by 25 basis points to the 4.50%–4.75% range marked the local Bitcoin price top at $108,000.

Markets deleverage before FOMC, except this time

A key indicator that provides insight into market sentiment is Bitcoin open interest—the total number of derivative contracts, mostly $1 perpetual futures, that have not been settled.

Historically, Bitcoin open interest falls before FOMC meetings, showing that traders are reducing leverage and risk exposure, as per the graph based on CoinGlass data.

However, this month another pattern has emerged. Despite Bitcoin’s $12 billion open interest shakeout earlier this month, in the days preceding the FOMC there was no noticeable decrease in Bitcoin’s open interest. BTC price, however, declined, which is unusual and could indicate a strong directional bet.

This could also be a sign that traders feel less anxiety about the Fed’s decision, possibly expecting a neutral outcome. Supporting this view, CME Group’s FedWatch tool indicates a 99% probability that the Fed will maintain rates at 4.25%–4.50%.

If the rates remain unchanged, it is possible that Bitcoin price will continue its current downtrend. This may be exactly what the HyperLiquid whale was hoping for when it opened a 40x leveraged short position worth over $500 million at its peak. However, this position is now closed.

Related: Bitcoin stalls under $85K— Key BTC price levels to watch ahead of FOMC

How are the spot Bitcoin ETFs reacting?

Unlike Bitcoin whales, investors in the spot Bitcoin ETFs have historically offloaded BTC holdings before FOMC meetings. 

Since the spot BTC ETFs launched in January 2024, most FOMC events have coincided with ETF outflows or, at best, modest inflows, according to CoinGlass data. The notable exception was the previous all-time high of January 2025, when even the spot Bitcoin ETF investors couldn’t resist the urge to buy.

On March 17, the spot Bitcoin ETFs saw $275 million in net inflows, marking a shift from a month of outflows. This may signal a shift in investor sentiment and expectations regarding the Fed’s policy decisions.

If spot ETF inflows are rising before the FOMC, investors might be anticipating a more dovish stance from the Fed, such as signaling future rate cuts or maintaining liquidity-friendly policies.

Investors could also be loading up on Bitcoin as a hedge against uncertainty. This suggests that some institutional investors believe Bitcoin will perform well regardless of the Fed’s decision.

Investors could also be anticipating a possible short squeeze. If traders were expecting Bitcoin to drop and positioned short, a sudden increase in ETF inflows could play a role in traders’ behaviors and trigger a short squeeze.

Following the FOMC, BTC’s price action, along with onchain data and spot ETF flows will show whether the recent activity was part of a long-term accumulation trend or just speculative positioning. 

However, one thing that many traders agree on now is that BTC could experience a significant price movement after the FOMC announcement. As crypto trader Master of Crypto put it in a recent X post: 

“The FOMC is tomorrow, and a Big Move is expected.” 

Even without rate cuts, the chance of the Fed issuing dovish statements could lift markets, while the absence of them could drive prices lower.

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