Bitcoin (BTC) has once again broken records, reaching an all-time high (ATH) of $106,648 this week, before seeing a slight retreat. With the markets watching closely, the focus is now on the upcoming decision by the US Federal Reserve (Fed) on interest rates, which will likely impact Bitcoin’s price trajectory. Let’s break down the key factors influencing Bitcoin's price and what we might expect in the short to medium term.
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🚀 Bitcoin’s Record Highs and the Fed's Impact
Bitcoin soared to a new ATH of $106,648 at the beginning of this week, following a 3.2% rise in the previous week. This latest surge has been fueled by ongoing demand, particularly from institutional investors. One key factor driving this momentum is the anticipated interest rate cut by the US Federal Reserve this Wednesday, which is widely expected to be a 25 basis point reduction. Lower interest rates typically favor risky assets like Bitcoin, as they help stimulate the economy and lower the cost of capital.
However, while the rate cut is largely priced in, the market's focus will shift to the Fed’s projections for 2025, which are expected to show fewer cuts than previously anticipated. A more hawkish stance could boost the US Dollar and Treasury yields, potentially making riskier assets like Bitcoin less attractive.
📈 Strong ETF Inflows & Institutional Confidence
Bitcoin’s recent price gains have been bolstered by robust inflows into Bitcoin Spot ETFs. Last week, these funds recorded a total inflow of $2.17 billion, a clear indication of sustained institutional demand. Additionally, the number of wallets holding at least 100 BTC has risen by almost 10% since the start of the bull rally on October 10, showcasing growing investor confidence.
Prominent industry experts, such as Darius Sit, Founder of "QCP Singapore", are also expressing increasing optimism for Bitcoin. Sit notes that the ongoing liquidity influx into Bitcoin is driving traditional market players, including sovereigns and institutions, to reassess their treasury strategies, adding long-term support to Bitcoin’s value.
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⚠️ Signs of Bearish Divergence: Caution for Traders
Despite the impressive rally, caution is advised. Technical indicators such as the Relative Strength Index (RSI) and the Awesome Oscillator (AO) are showing signs of bearish divergence, where Bitcoin’s price continues to make new highs, but momentum indicators fail to confirm this bullish strength. This suggests a potential weakening of the bullish trend, raising the risk of a price correction in the near term.
The current Estimated Leverage Ratio (ELR) has also reached annual highs, signaling that leverage may be overheating. High leverage in the market increases the risk of a sharp pullback if large positions are liquidated in a correction.
🛑 Possible Pullback or Continued Rally?
Traders should be prepared for two potential scenarios:
1. Pullback to Support Levels: If Bitcoin’s price fails to sustain above the $106,000 mark, we could see a pullback to $100,000. Should this level not hold, Bitcoin may test the next major support at $90,000.
2. Bullish Continuation: On the other hand, if Bitcoin manages to hold above $106,000 and continue its momentum, the next target could be a fresh ATH near $119,510, driven by the 141.4% Fibonacci extension level.
🧐 Key Takeaways for Investors
Fed Decision: The Fed’s interest rate decision will be a critical catalyst. A 25 basis point cut is expected, but attention will shift to projections for 2025. Any indication of fewer rate cuts next year could cool bullish sentiment.
Institutional Demand: Strong inflows into Bitcoin ETFs and increasing institutional adoption are vital factors keeping the bullish narrative alive. Bitcoin’s appeal as a store of value and hedge against inflation remains intact.
-Technical Caution: While the price action has been strong, traders should be mindful of the bearish divergence in technical indicators. A correction could be in play, so caution is warranted.
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💡Final Thoughts
Bitcoin’s recent ATH of $106,648 signals its growing importance in the broader financial landscape. However, with rising technical risks and uncertainty surrounding the Fed’s future actions, investors should stay alert. The next few days will be pivotal as Bitcoin navigates the balance between bullish momentum and the potential for correction.
As always, traders should be prepared for volatility and manage their risk appropriately in this dynamic market environment.
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