Currently, investors’ attention is fixated on the potential Federal Reserve interest rate cut and its likely impact on major assets like Bitcoin (BTC). Bitcoin recently experienced a drop below $60,000 due to concerns over the overall economic health, with the rate cuts posing a significant potential shift in direction, especially in light of recession fears.
A cryptocurrency trading expert named Trading Shot outlined potential scenarios for Bitcoin in a TradingView post on September 11, focusing on the correlation between the Global Liquidity Index (GLI) and Bitcoin’s price movement. The GLI representation tracked major central banks like 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 infuse more money into the economy, leading to a devaluation of the current currency. This typically results in increased access to loans for both corporations and individuals, bolstering their spending and investment capabilities. Historically, riskier assets such as cryptocurrencies tend to increase in value when liquidity rises.
The expert highlighted significant breakouts in the GLI that historically triggered Bitcoin rallies, emphasizing how previous liquidity drops and flattening created resistance periods that, once broken, propelled Bitcoin into bullish rallies. Conversely, drops and flattening of liquidity marked the onset of Bitcoin’s bear cycles, necessitating the breakthrough of these resistance zones for Bitcoin to rally again.
Current chart patterns indicate the formation of a wedge pattern in the GLI, with lower highs acting as resistance. Observing these patterns, a breakout above this trendline could mirror past cycles’ resistance breakouts, potentially initiating a parabolic rally for Bitcoin akin to prior bull runs.
Emphasizing key levels to watch, targets for Bitcoin include $68,000 as an initial psychological barrier and resistance point, followed by a new all-time high of $150,000. A long-term scenario of reaching $350,000 is also conceivable, contingent on a substantial and sustained surge in global liquidity alongside favorable market conditions for cryptocurrencies.
The ongoing influence of macroeconomic factors on Bitcoin is evident, particularly regarding the interest rate cut and potential reactions to the Consumer Price Index. With U.S. inflation slowing to 2.5% in August but remaining above the desired rate, investors await potential momentum after data releases, as discussed by crypto trading expert Michaël van de Poppe.
As of the latest data, Bitcoin was trading at $56,662, showing a slight correction of 0.4% in the last 24 hours while posting a nearly 1% increase on the weekly chart.
In conclusion, for Bitcoin to embark on a parabolic rally post-rate cuts, it must surmount current resistance levels and reclaim the $60,000 base for fresh gains.