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Price Action
BTC price action has continued to be lacklustre over the past couple of weeks. Despite a brief pump after the Fed announced potential near-future cuts in U.S. interest rates, BTC price has continued to trend lower.
Currently at $112,000, BTC price is holding just above the first significant support level of the 128-day moving average, which is currently at $108,500.
Figure 1: BTC trending down.
The level of uncertainty in the market is shown by the current Neutral score in the Fear & Greed Index. Somewhat surprising at this stage of the bull market, but we believe the market’s uncertainty is coming from the gradual trending down of recent price action.
Figure 2: Neutral score, Fear & Greed Index.
The current sentiment in the Fear & Greed Index may also reflect some impatience among market participants. BTC is up just 4.5% over the past three months. That increase is likely to be significantly less than many market participants were expecting for this stage of the bull cycle.
Figure 3: Past 3-month performance of BTC.
The Big Story: Will Falling Rates Spark Bitcoin’s Next Leg Up?
Last week, Jerome Powell signalled that U.S. interest rates may need to come down sooner than expected. Markets are now pricing in two cuts before year-end. For risk assets like Bitcoin, this shift is critical. Lower rates reduce the appeal of holding cash and bonds, and they’ve historically fueled capital flows into harder assets. We saw this after the Covid crash, where low rates helped to fuel the 2021 bull run.
Figure 4: U.S. Interest Rates.
At the same time, global liquidity continues to rise. Central banks, facing fragile economies and mounting debt burdens, are unlikely to stop printing. (See chart below.) More liquidity in the system has consistently been bullish for Bitcoin, which stands apart as a hard asset with a fixed supply.
Figure 5: Global Liquidity.
Meanwhile, government debt is climbing at an unsustainable pace. The higher the debt, the greater the incentive for policymakers to inflate it away. That reality pushes more investors to seek protection in assets like Bitcoin, where the rules can’t be changed at the whim of a central bank.
Figure 6: U.S. Federal Debt continues to rise.
Taken together, the medium-term outlook is powerful: falling U.S. rates, expanding global liquidity, and spiralling government debt. Each of these forces points in the same direction toward rising demand for Bitcoin. As these macro tailwinds gather, they could very well fuel the next wave of the bull cycle.
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Speak again soon.
Bitcoin Magazine Pro Team.