Bitcoin pauses rally after surpassing $108,000

Bitcoin’s meteoric rise briefly broke the $108,000 barrier for the first time on Tuesday before cooling off to $106,400 by Wednesday morning in Singapore. The cryptocurrency’s latest rally has fueled the total market value of crypto assets to nearly $4 trillion, according to data from CoinGecko.

Traders are now closely watching the Federal Reserve's upcoming interest rate decision and weighing the impact of President-elect Donald Trump's supportive stance on cryptocurrencies.

Trump’s crypto-friendly policies ignite optimism

U.S. President-elect Donald Trump has promised regulatory reforms aimed at cementing the U.S.’s leadership in the cryptocurrency space. His bold proposals include creating a strategic Bitcoin reserve, signaling a significant shift in government attitudes toward the digital asset.

Market sentiment received an additional boost from the anticipated inclusion of MicroStrategy Inc. in the Nasdaq 100, a move seen as a validation of the company’s Bitcoin-focused strategy. As one of the largest institutional holders of Bitcoin, MicroStrategy's growing prominence could set the stage for further gains in its stock price and broader market confidence.

Federal Reserve decision: A key market catalyst

The Federal Reserve is widely expected to announce a quarter-point interest rate cut on Wednesday. However, uncertainty clouds the path for monetary policy in 2025 due to strong U.S. economic growth and inflation risks stemming from Trump’s broader economic agenda.

“Expect the Federal Open Market Committee (FOMC) meeting this week to add to market volatility,” wrote Vetle Lunde and David Zimmerman, analysts at K33 Research, in a note. “Following the Fed meeting, macroeconomic conditions are expected to calm, potentially paving the way for Bitcoin to sustain its upward momentum during the holiday season.”

Bitcoin's momentum: Eyeing the $120,000 milestone

Bitcoin has soared more than 55% since Trump’s presidential victory on November 5, with investors pouring into cryptocurrency exchange-traded funds. Enthusiasm remains strong despite lingering concerns over Bitcoin’s historical price volatility, potential overextension, and lack of traditional valuation metrics.

Data from Deribit, one of the largest crypto derivatives platforms, reveals the highest concentration of open interest for bullish bets is now targeting a $120,000 strike price. This level has become a psychological milestone for traders eyeing further gains.

Despite the optimism, analysts are urging caution at these elevated levels.

“Bitcoin briefly touched an all-time high on Tuesday but retreated to $106,000 by the close, highlighting potential risks for buyers chasing the rally,” Tony Sycamore, a market analyst at IG Australia Pty told Bloomberg.