Following the Federal Reserve's rate increase on September 16, Bitcoin (BTC) defied expectations by surging approximately 13%, with Wall Street funds emerging as the primary driver behind this counterintuitive rally. This unexpected market movement signals a temporary breakdown in the traditional inverse relationship between tightening monetary policy expectations and cryptocurrency prices, as capital quickly flowed back into the market after the policy decision was announced.
The core logic behind this capital return stems first from the elimination of uncertainty. On September 11, interest rate futures data showed a 69.6% probability of another September rate hike, prompting a wave of capital outflows as investors sought to mitigate risk. However, on September 15, the Clear Act, designed to regulate the U.S. cryptocurrency industry, failed to pass in the Senate by a narrow 50-to-49 vote, creating a short-term scenario where negative news was fully priced in. Bitcoin fell 3.3% that day, closing near $75,600 — a level that precisely formed the low point of the 'right shoulder' pattern in price action. The following day, the Fed formally raised its target interest rate range to 3.75%-4%. With the waiting period concluded, funds that had withdrawn ahead of the vote no longer needed to await the decision outcome, unlocking their willingness to re-enter the market.
A more critical variable is the market's growing desensitization to a high-rate environment. The two-year U.S. Treasury yield, a key gauge of borrowing costs that typically rises when traders anticipate further hikes and falls when cuts are expected, hit a September high of 4.76% on September 18 and September 21 — precisely the days Bitcoin recorded its two major surges. Tom Lee of Fundstrat noted that the Fed is unlikely to adopt a more hawkish stance going forward, a sentiment that has strengthened buyers' tolerance for elevated rate conditions.
Technical breakthroughs combined with massive capital inflows form the third driving force. The UTXO realized price distribution chart, which reveals holders' cost basis, shows that the area around $87,100 accounts for 1.34% of Bitcoin's total supply, while the zone near $88,400 represents 0.46%. The relatively low holding density in these ranges suggests reduced selling pressure from holders waiting to exit at these levels, clearing the path for upward price movement. Capital flow data further confirms this trend: between September 17, 18, 21, and 22, Bitcoin spot ETFs accumulated $2.31 billion in net inflows. Specifically, on September 18, funds purchased $433 million worth of Bitcoin, driving prices up 5.9%; on September 21, buying volume surged to $999 million, pushing prices higher by 6.7%. As of September 22, Bitcoin's cumulative 13.2% gain was almost entirely attributed to these two rallies.
The strong upswing on September 21 also triggered a short squeeze, with $262 million in short positions forcibly liquidated within one hour, intensifying demand through forced buying. Supported by the highest single-day trading volume since August 21, Bitcoin successfully broke through the 'neckline' of the inverse head-and-shoulders pattern that had been forming since February. Subsequent market performance demonstrated remarkable resilience, with the September 22 pullback limited to just 0.5% — far shallower than the 3.3% decline on September 15 — indicating that bullish momentum now holds the upper hand.
Looking ahead, the technical chart paints a clear upward trajectory with key support levels. The first resistance sits at $86,935, a level Bitcoin touched but failed to hold. Should the price close above this point, the next target is $89,825, followed by a challenge at $93,940. According to this pattern model, Bitcoin possesses roughly 43% upside potential measured from the 'neckline,' with a theoretical target of $117,247 — a level just 7% below its all-time high of $126,080. The support structure remains equally robust: the area around $84,569 accounts for 2.92% of total supply, representing the largest concentration within a 20% price range, and sits slightly above the technical support at $84,045. Should the daily closing price fall below $84,045, the 'neckline' support would shift down to approximately $82,000.
Analysts believe that even if two-year Treasury yields remain elevated, sustained fund buying indicates that panic sentiment has subsided. As long as the August inflation data, scheduled for release on September 30, does not reignite market turmoil, and prices hold above $86,935, the 43% upside potential remains valid.
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