Bitcoin (CRYPTO: BTC) on Tuesday surged by 5.3%, trading at $60,985 after hitting a high of $61,331, as the market braces for the Federal Reserve's critical interest rate decision on Sep. 18, a move that could set the stage for considerable volatility.

Ethereum (CRYPTO: ETH) also experienced gains, rising by 4% to $2,375.

What Happened: With the market split between a 25 and 50 basis point cut, traders are positioning themselves for the anticipated Fed decision.

In a note sent to Decrypt, Illia Otychenko, Lead Analyst at CEX.IO, highlighted the potential for increased market fluctuations, noting that a 50 basis point cut could generate more volatility than a 25 basis point reduction.

He further explained that the Fed's forward guidance might be the more influential factor, stating, "A 25 bps cut with more aggressive guidance might signal a dovish stance, while a 50 bps cut paired with a passive outlook could cause uncertainty."

Otychenko emphasized that the market's reaction may depend more on Jerome Powell's commentary after the decision rather than the size of the rate cut itself.

If Powell's remarks fail to provide clarity on the Fed's short-term strategy, investor uncertainty could lead to increased risk aversion, potentially putting pressure on Bitcoin prices.

The cryptocurrency market is not only focused on the Fed's decision but is also watching several other global macroeconomic events this week.

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These include Japan's trade data, the Bank of England's interest rate decision, and the U.S. initial jobless claims, all of which could impact global economic sentiment and further affect crypto prices.

Later in the week, Japan's Consumer Price Index (CPI) and the Bank of Japan's rate decision will also contribute to the global financial landscape, providing further data points for crypto traders.

Inflows activity in Bitcoin and Ethereum exchange-traded funds (ETFs) also reflects mixed market sentiment.

On Sep. 16, Bitcoin spot ETFs recorded a net inflow of $12.9 million, driven by inflows into BlackRock's (NASDAQ:IBIT) and Fidelity's (CBOE: FBTC) ETFs, according to data from SoSo Value.

However, Grayscale's GBTC ETF saw significant outflows of $20.75 million, suggesting institutional investors remain cautious.

Ethereum ETFs saw a net outflow of $9.5 million, with major outflows from Grayscale's (NYSE:ETHE) ETF, though BlackRock's (NASDAQ:ETHA) ETF recorded inflows of $4.15 million.

What's Next: These developments will be part of the broader conversation at Benzinga's Future of Digital Assets event on Nov. 19, where industry leaders will analyze how macroeconomic policies are influencing the cryptocurrency market and what this means for the future of digital assets.

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