At the moment, investors are closely monitoring the potential Federal Reserve interest rate cut and its expected impact on major assets like Bitcoin (BTC). Bitcoin recently experienced a price decline below $60,000 due to concerns about the overall economic health. The rate cuts are seen as a significant decision, especially in light of recession fears.
A cryptocurrency trading expert named Trading Shot outlined potential scenarios for Bitcoin in a post on TradingView. The focus was on the correlation between the Global Liquidity Index (GLI) and Bitcoin’s price movement. The GLI represents projections tracking major central banks, including the Federal Reserve, European Central Bank, People’s Bank of China, Bank of Japan, and Bank of England.
Historically, when central banks reduce interest rates, it leads to increased liquidity in the economy, devaluing the existing currency. This results in more accessibility to loans for corporations and individuals, subsequently enhancing their spending and investment capabilities. Riskier assets such as cryptocurrencies tend to appreciate in value when liquidity increases.
Regarding significant breakouts in the GLI, they have historically preceded Bitcoin rallies. Notably, drops and flattening in liquidity created resistance periods. Breaking through these resistance zones initiated bullish rallies for Bitcoin, observed in previous years like 2016 and 2020. Conversely, declines in liquidity marked the beginning of Bitcoin bear cycles, leading to resistance zones that needed to be surpassed for Bitcoin to rally again.
Current chart patterns show the GLI forming a wedge pattern with lower highs as resistance along the trendline. A breakout above this trendline could replicate previous resistance breakouts, potentially triggering a parabolic rally for Bitcoin akin to past bull markets.
The current price levels to watch for Bitcoin are $68,000 as a psychological barrier and point of resistance, a new all-time high of $150,000, and a long-term target of $350,000 if global liquidity significantly increases and favorable market conditions persist for cryptocurrencies.
Overall, Bitcoin’s reactions are tied to macroeconomic factors, particularly the interest rate cut and how it aligns with the Consumer Price Index. Noted crypto trading expert Michaël van de Poppe highlighted the importance of monitoring potential momentum post-data release, provided Bitcoin maintains levels between $55,000 and $56,000. U.S. inflation has shown signs of slowing but remains above the desired 2%.
As of the latest data, Bitcoin is trading at $56,662, registering a slight 0.4% correction in the last 24 hours but up nearly 1% on the weekly chart. To achieve a parabolic rally post-rate cuts, Bitcoin must overcome existing resistance and reclaim the $60,000 level known as a base for new gains.