Federal Reserve Meeting Hopes Push Bitcoin Above $116,000

The cryptocurrency market witnessed a major rally this week, led by Bitcoin, which briefly surged above $116,000. The sudden spike in the world’s largest cryptocurrency comes as investors grow optimistic about the Federal Reserve upcoming September 17 meeting, with many betting on a rate cut following weaker-than-expected inflation numbers.

This marks a significant rebound for Bitcoin, which had been trading sideways for nearly two weeks before breaking out midweek. Analysts and traders alike are closely watching the macroeconomic environment, believing that easing inflation and potential monetary stimulus could create a favorable environment for risk assets like cryptocurrencies.

In this long-form analysis, we’ll explore the key factors driving Bitcoin’s price action, the role of macroeconomic data in shaping investor sentiment, expert insights from industry leaders, the reaction of altcoins, and what the future might hold for digital assets as the Federal Reserve prepares to make its next move.

Bitcoin Breaks Through $116,000

After spending nearly two weeks in a consolidation phase, Bitcoin (BTC) finally broke through resistance levels this week. On Thursday, the cryptocurrency reached a local high of $116,549, before stabilizing around $116,480 according to CMC data. This 1.8% daily gain might appear modest on the surface, but it comes on top of a breakout that ended a period of unusually flat trading. Market observers noted that the sudden rally was not purely technical. Instead, macro triggers—particularly inflation data from the U.S.—sparked renewed confidence among traders. Julio Moreno, Head of Research at CryptoQuant, explained:

“This week’s price jump is tied to bets that the Fed will cut rates soon after weaker inflation numbers.”

The timing of Bitcoin’s surge is critical. Investors had been hesitant in recent weeks, given uncertainty about whether the Fed would stick with its hawkish stance. Now, however, the narrative appears to be shifting.

Inflation Data Takes Center Stage

The most important driver behind this rally was the release of the U.S. Producer Price Index (PPI) report for August 2025. The index unexpectedly dropped by 0.1%, marking its first decline since April. This came as a surprise, particularly after July’s sharp increase, which had triggered a wave of selling across both traditional and crypto markets. Economists had been bracing for continued inflationary pressures, but the August data painted a different picture:

• Falling crude oil prices significantly reduced input costs for manufacturers.
• Easing service prices also contributed to the decline, showing that inflationary pressures might be cooling faster than anticipated.

Sean Dawson, Head of Research at Derive, highlighted the market’s reaction:

“Markets are rallying because a rate cut next week looks almost certain. The Fed seems ready to add more money into the system, especially with weak job growth in the U.S.”

This unexpected dip in producer prices gave investors hope that the Fed would finally pivot toward a more accommodative monetary policy, potentially igniting further rallies in Bitcoin and other risk assets.

Market Bets on Federal Reserve Rate Cuts

The Federal Reserve policy decisions have always had a major influence on Bitcoin. Investors often view the cryptocurrency as a hedge against inflation and a beneficiary of loose monetary policy. According to data from CME’s FedWatch Tool:

• There is a 92.7% probability of a quarter-point rate cut.
• The chance of a more aggressive half-point cut currently stands at 7.3%.

These probabilities strongly suggest that markets have already priced in at least one cut, with some traders betting on additional easing before the end of the year. Michael Novogratz, CEO of Galaxy Digital, expressed bullish sentiment in an interview with CNBC:

“We’re likely to see another strong run by the end of the year once the Fed starts cutting.”

If the Fed indeed pivots, it could mark the start of a new liquidity-driven cycle, where Bitcoin may continue to benefit as investors pour money into alternative assets.

On-Chain Data Points to Reduced Selling Pressure

While macroeconomic factors dominate headlines, on-chain data provides further evidence that Bitcoin could be entering a more sustainable uptrend. CryptoQuant’s Julio Moreno observed that much of the recent profit-taking activity has already occurred. This means that the market may be better positioned for upward movement, as selling pressure diminishes. This is consistent with historical Bitcoin cycles. Typically, when long-term holders have already realized profits, the supply of BTC available for sale decreases, leaving room for demand-driven price growth.

ETFs and Institutional Inflows

Sean Dawson of Derive also pointed to another critical factor that could fuel Bitcoin’s momentum: rising inflows into Bitcoin ETFs. Since the approval of several spot Bitcoin ETFs, institutional investors have gradually increased their exposure to the asset. These ETFs provide a regulated and accessible vehicle for both retail and professional traders, further integrating Bitcoin into the traditional financial system. As Dawson explained:

“ETF inflows are increasing, and we expect this trend to strengthen if the Fed eases policy. That could set the stage for a much larger rally.”

Institutional participation is often considered a long-term bullish indicator, as it adds stability and legitimacy to the market.

Altcoins Lag Behind

Interestingly, while Bitcoin hit a 19-day high, the broader altcoin market showed only modest gains. Ethereum, XRP, and Solana all registered minor upticks, but none mirrored Bitcoin’s momentum.

However, two exceptions stood out:

• Dogecoin (DOGE) skyrocketed 25% in just 24 hours, fueled by speculative trading and community-driven enthusiasm.
• Hyperliquid (HLP) also posted an impressive 23% surge, catching the attention of traders looking for high-growth opportunities.

The divergence highlights a common pattern in crypto markets: Bitcoin leads the rally, while altcoins either follow with a delay or experience isolated surges based on specific catalysts.

Bitcoin’s surge past $116,000 marks a critical turning point in the cryptocurrency market, driven largely by unexpectedly weak inflation data and renewed bets on a Federal Reserve rate cut. With analysts like Julio Moreno and Sean Dawson pointing to easing selling pressure and rising ETF inflows, the broader outlook appears increasingly positive. While altcoins lag behind, Bitcoin continues to assert itself as the primary beneficiary of macroeconomic shifts, reaffirming its role as a leading alternative asset. With the Fed’s September 17 meeting just days away, all eyes are now on policymakers—and the decisions they make could determine whether Bitcoin embarks on its next historic rally.

Disclaimer: CryptopianNews shares this for learning and info only. It’s not meant to be financial or investment advice. Crypto markets change a lot and move quickly. Investing in them can be risky. You should always look into things yourself. Talk to a trained financial advisor before making any choices about investing.