Bitcoin (BTC) entered Wednesday’s Asian session on firmer ground, edging 1% higher to trade around $116,500. Market focus is firmly on the U.S. Federal Reserve, which is widely expected to deliver a 25-basis-point rate cut later in the day. According to the CME FedWatch tool, traders are pricing in a 96% probability of such a move, an outcome that could prove pivotal for both equities and cryptocurrencies.

S&P 500 Outlook and Bitcoin’s Correlation

JPMorgan research suggests the S&P 500 tends to gain roughly 15% over the following year when the Fed cuts rates during a rally. Although the first month after such decisions has historically been volatile, the bank views pullbacks as longer-term buying opportunities.

This outlook matters for Bitcoin because of its growing correlation with equity markets in recent years. During the COVID-19 crisis in 2020, BTC fell alongside the S&P 500 when panic selling drove investors into cash, but both assets staged remarkable recoveries by year-end. In 2023, the S&P rose 26% while Bitcoin surged 147%. The trend continued in 2024, with the index climbing 24% and BTC soaring 135%.

Market Sentiment Strengthens for Crypto

Investor behavior also supports the bullish case. Data from CryptoQuant shows that BTC inflows into exchanges have dropped to just 25,000 coins, the lowest in a year. At the same time, average deposit sizes have halved since July, suggesting holders are less interested in selling.

Spot Bitcoin ETFs in the U.S. reinforce this sentiment, with net inflows of $2.34 billion recorded last week. The strong demand for these investment vehicles highlights renewed optimism ahead of the Fed’s policy announcement.

A Potential Catalyst for BTC

If the Fed confirms a rate cut, the S&P 500 may deliver another year of strong returns, providing a tailwind for Bitcoin. Historical parallels show that when traditional markets rally on easier monetary policy, BTC often magnifies those gains. Having already rebounded from $108,000 earlier this month to above $116,000, Bitcoin is positioned to extend its bullish run if expectations materialize.

While near-term volatility is likely, both equities and crypto could benefit from a policy shift designed to support growth. For traders and investors, the Fed’s decision may mark the start of another decisive chapter in Bitcoin’s ongoing bull cycle.