Bitcoin
Will Fed rate cuts trigger a recovery?
In a surprising turn of events, the latest Consumer Price Index (CPI) report revealed unexpectedly low US inflation figures. Core inflation fell by 0.1 percentage points from 3.4% to 3.3% in June, marking its first decline in nearly four years. Analysts interpreted this as a bullish sign for Bitcoin. However, despite these promising numbers, the price of Bitcoin has yet to show any significant gains.
With a possible interest rate cut by the Federal Reserve, which could discourage investment in fixed income assets, investors may seek higher returns elsewhere.
Markus Thielen, analyst at 10x Research, foreseen a Bitcoin rally leading up to the US inflation announcement, expecting a decline in inflation. Although Bitcoin briefly surged after the CPI announcement, it was quickly sold off, even with the high probability of a rate cut in September.
Let’s analyze, okay?
Decoding the high theory
The latest report highlights a crucial aspect of financial markets: success often involves going against the grain and being right. The post-CPI rally was short-lived, as the market had already anticipated lower inflation. Identifying market rebounds is essential—one scenario can lead to substantial gains, while another can result in significant losses.
What’s next for Bitcoin?
Following recent inflation data, the probability of a September rate cut has increased to 87%, and the probability of two or more rate cuts from the Federal Reserve by November has surpassed 50%. Coupled with a nearly 1% drop in the US dollar index, these factors suggest that Bitcoin could see another rally.
Investment opportunities to discover
Analysts believe that now is an opportune time to invest in Bitcoin, given the supporting factors. While selling pressure from the German government is easing, Bitcoin appears technically oversold. Anticipated liquidity support from ETFs buying the dip and potential rate cuts from the Fed add to the positive sentiment.
However, potential selling pressure from Grayscale and upcoming Mt. Gox payments by July 24 could impact the market.
FTX’s potential $16 billion in creditor payments, with $3.2 billion to $5 billion possibly reinvested in crypto assets, adds further complexity to the market. Despite these challenges, the combination of reduced selling pressure, ETF activity, and expected Fed rate cuts could drive Bitcoin’s price higher in anticipation of the rate cut.
Bitcoin Price Fights
Amidst a bullish market, Bitcoin appears to be struggling. With the Relative Strength Index (RSI) at 48.30 and priced at $57,412, Bitcoin recently faced resistance at $59,500 and dropped 3.87%. It has now entered a triangle formation, signaling bear market control. Concerns over a $1.1 trillion market cap drop are weighing on sentiment. Large BTC holders are buying more, while retail investors are selling.
After the German government’s BTC sales and Mt. Gox refunds, the market could see a recovery in 1-2 months, potentially by Q3.
Technical indicators scream “bearish,” but analysts are bullish. Who do you trust? Share your opinion with your analysis!