In the realm of investments, the current focus lies on the potential effects of a Federal Reserve interest rate cut on major assets like Bitcoin (BTC). Concerns surrounding the economy’s well-being have led to Bitcoin’s price retreating below the $60,000 mark recently. Investors are now contemplating how the upcoming monetary policy shifts may alter this digital currency’s trajectory in response to potential recessionary developments.
A trading expert known as Trading Shot has outlined various scenarios for Bitcoin on a TradingView post dated September 11, primarily examining the relationship between the Global Liquidity Index (GLI) and Bitcoin’s price movements. The GLI serves as a representation tracking major central banks such as the Federal Reserve, European Central Bank, People’s Bank of China, Bank of Japan, and Bank of England.
Analysis reveals that interest rate cuts by central banks typically boost liquidity by injecting more money into the economy. This devalues the current currency, leading to increased access to loans that enhance spending, buying, and investing capacities for corporations and individuals. Historically, assets like cryptocurrencies have tended to appreciate in value when liquidity in the market rises.
By observing past trends, significant breakouts in the GLI have often signaled Bitcoin rallies. Instances where liquidity previously dropped and stabilized created resistance which, upon being breached, paved the way for bullish rallies in 2016 and 2020. Conversely, Bitcoin’s bear cycles tend to commence when liquidity decreases and stabilizes, forming resistance zones that need to be overcome for another rally to occur.
Chart patterns suggest that the GLI is forming a wedge pattern with lower highs, currently positioned along a trendline. A breakout above this line could mimic previous resistance breakouts, likely sparking a parabolic rally reminiscent of past Bitcoin bull runs. Initial price targets include $68,000 and a new all-time high of $150,000, with a long-term projection of $350,000 contingent on sustained high liquidity levels and continued positive conditions for the cryptocurrency market.
Overall, Bitcoin’s performance remains intertwined with broader macroeconomic factors, especially with the focus on interest rate cuts and the potential implications for the Consumer Price Index. As indicated by crypto trading expert Michaël van de Poppe, anticipation for momentum post-data release remains high, provided Bitcoin maintains levels between $55,000 and $56,000. It’s pertinent to mention that U.S. inflation eased to 2.5% in August, showing signs of moderation but still exceeding the desired 2% rate.
At present, Bitcoin is trading at $56,662, reflecting a minor correction of 0.4% in the last 24 hours while posting nearly a 1% increase on the weekly chart. A key aspect to monitor is whether Bitcoin can surpass its current resistance level and reclaim $60,000, signaling a foundation for further upward movement.