Currently, investors are closely monitoring the potential Federal Reserve interest rate cut and its probable impact on major assets like Bitcoin (BTC). Bitcoin’s price recently dipped below the $60,000 threshold due to concerns about the overall health of the economy. The expected rate cuts are seen as a significant move, especially in light of looming recession fears.
Analyzing how Bitcoin might respond, cryptocurrency trading expert Trading Shot outlined various scenarios for the leading digital asset in a post on TradingView dated September 11. The expert focused on the connection between the Global Liquidity Index (GLI) and Bitcoin’s price movement.
The GLI representation illustrated the forecast, tracking major central banks such as the Federal Reserve, European Central Bank, People’s Bank of China, Bank of Japan, and Bank of England.
The analysis indicated that when central banks reduce interest rates, they inject more money into the economy, devaluing the currency. This stimulates increased access to loans for businesses and individuals, enhancing their spending, purchasing, and investment capabilities. Historically, riskier assets like cryptocurrencies tend to appreciate when liquidity expands.
The expert also highlighted significant breakouts in the GLI, which have historically corresponded to Bitcoin’s rallies. For instance, when liquidity declined and flattened, it created a resistance phase. Subsequently, breaking through this resistance led to bullish rallies for Bitcoin around 2016 and 2020.
Furthermore, periods when liquidity dropped and flattened marked the onset of Bitcoin’s bear cycles. These instances typically created resistance zones that needed to be breached for Bitcoin to rally once more. This recurring pattern was evident in 2018 and 2022, aligning with Bitcoin’s downturns.
Observations of chart patterns revealed the formation of a wedge pattern within the GLI with descending highs as resistance. The GLI currently aligns precisely with this trendline. A breakout above this pattern could mirror previous cycles of resistance breaches, potentially initiating a parabolic rally for Bitcoin, akin to previous bull runs.
Targets to watch include $68,000 as the initial milestone, symbolizing a psychological barrier and resistance point for profit-taking. Another target is a new all-time high of $150,000, while a long-term scenario of reaching $350,000 may be feasible under sustained global liquidity growth and favorable cryptocurrency market conditions.
Bitcoin’s performance continues to be influenced by macroeconomic factors, with a keen focus on the interest rate cut and potential reactions to the Consumer Price Index. Cryptocurrency expert Michaël van de Poppe indicated that investors should anticipate potential momentum post-data release, provided Bitcoin maintains levels between $55,000 and $56,000.
Notably, U.S. inflation decelerated to 2.5% in August, hinting at a slowdown but remaining above the desired 2% rate.
At the time of reporting, Bitcoin was trading at $56,662, experiencing a minor 0.4% correction over the last 24 hours and a nearly 1% increase on the weekly chart.
In conclusion, for Bitcoin to embark on a parabolic rally following rate adjustments, it must surpass existing resistance levels and reclaim the $60,000 mark, seen as a foundation for future gains.