Currently, investors are closely monitoring the potential Federal Reserve interest rate cut and its expected impact on the price movements of major assets like Bitcoin (BTC).
Bitcoin recently experienced a price decline below $60,000 due to concerns about the overall economic health. The anticipated rate cuts are seen as a significant decision, especially amid fears of a recession.
A cryptocurrency trading expert known as Trading Shot outlined possible scenarios for Bitcoin’s price trajectory based on the correlation between the Global Liquidity Index (GLI) and Bitcoin in a post on TradingView. The GLI tracks major central banks such as the Federal Reserve, European Central Bank, People’s Bank of China, Bank of Japan, and Bank of England.
Analysis suggests that when central banks lower interest rates, they inject more money into the economy, resulting in the devaluation of the current currency. This liquidity boost allows corporations and individuals to access more loans, thereby increasing their spending and investing capabilities. Historically, riskier assets like cryptocurrencies tend to appreciate in value when liquidity rises.
The past relationship between Bitcoin and the GLI has shown that significant breakouts in liquidity levels have corresponded to Bitcoin rallies. Conversely, when liquidity dropped and remained stagnant, Bitcoin entered bearish cycles, with resistance zones needing to be breached for a potential rally.
Chart patterns indicate a wedge formation in the GLI with lower highs as resistance. A breakout above this trendline could mirror past resistance breakouts, potentially triggering a parabolic run for Bitcoin, similar to previous bullish cycles.
Key price levels to watch for Bitcoin include $68,000 as an initial target, marking a psychological barrier and potential resistance point for profit-taking investors. Another target is a new all-time high of $150,000, with a long-term scenario projecting a price of $350,000 contingent on sustained global liquidity growth and favorable market conditions for cryptocurrencies.
In conclusion, Bitcoin’s performance is intertwined with macroeconomic factors, particularly the interest rate cuts and Consumer Price Index. Experts suggest that momentum may follow after potential data releases if Bitcoin maintains levels between $55,000 and $56,000.
Recent data indicates U.S. inflation slowing to 2.5% in August, although still above the desired 2% rate.
As of now, Bitcoin is trading at $56,662, reflecting a slight 0.4% correction over the past 24 hours with a weekly increase of nearly 1%.
For Bitcoin to embark on a parabolic rally post-rate cuts, it must surpass current resistance levels and reclaim the $60,000 mark, seen as a launching pad for further gains.