U.S. Federal Open Market Committee meeting
At Wednesday's meeting, the Federal Reserve, as expected, chose to keep the federal funds target rate unchanged (5.00%--5.25% base rate). By the end of this year, the Fed is planning three interest rate cuts - an expected 75 basis points of rate cuts throughout the year. The Fed's attitude was more dovish than expected, successfully boosting market confidence.
Goldman Sachs updated their chart and they still see rates ending up at 3.25-3.5% in 2026. We call it "neutral". The reason for neutral is that inflation is likely to hover around that level for quite some time, well above the 2% target the Fed has been targeting.
The rate cut will be accompanied by an easing of the Fed's quantitative tightening (OT) strategy; at the current pace, debt will be reduced by $60 billion per month. All told, the Fed's balance sheet has shrunk from about $9 trillion to about $7.5 trillion today, and the easing of quantitative tightening (QT) will have a stimulating effect on risk money markets.
Bitcoin price pullback
Markets have experienced significant losses this week, highlighting continued volatility. However, it is amid this uncertainty that the $60,000 level is seen as providing significant support, offering investors a decent potential buying opportunity.
Bitcoin is currently stable around $64,000. As we pointed out last week, in the long run, this "pullback" is nothing. The market direction is as bullish as ever, and such pullbacks are healthy because they prevent excessive leverage accumulation and clean up bad leverage players.
Prices alternated between $68,900 and $60,760 before a partial bounce, which highlighted the market’s resilience and the ongoing tug-of-war between bulls and bears. Bitcoin is currently in a re-accumulation zone, and the continuation of the accumulation and integration phase may bring opportunities to investors.
In every bull run, altcoins typically establish support levels as Bitcoin gains momentum. Once major players exit positions established in Bitcoin, they often inject liquidity into altcoins. Historically, altcoins tend to see significant gains when Bitcoin breaks out of the previous cycle’s highs.
Cash ETFs see net outflows for first time since February
As expected, there is a strong correlation between the decline in Bitcoin prices and spot ETFs; Wall Street is in charge.
But in the long run, current outflows from spot ETFs pale in comparison, and the latter may soon recover. The fact is that total net inflows are still over 200,000 BTC.
Grayscale Bitcoin continues to outflow
This week has been a big one for GBTC outflows; this could be a major catalyst for recent price action. From Monday to Friday, more than 27,000 BTC (approximately $1,840,000,000) left Grayscale. Interestingly, the vast majority of Grayscale outflows were absorbed by BlackRock and Fidelity.
Short-Term Holder Realized Price (STH-RP)
The cost basis for short-term holders continues to rise as new market participants accumulate at higher prices. The current effective price for short-term holders is around $57,000. The closer this indicator is to spot prices, the more likely we are to see another uptick.
My trading experience tells me:
If the price of Bitcoin is higher than STH-RP, Bitcoin is in an uptrend;
If the Bitcoin price is lower than STH-RP, Bitcoin is in a downtrend;
This indicator is also powerful as it has a proven track record of always acting as support or resistance during trends, indicating a trend reversal if and when Bitcoin price breaks/falls below STH-RP.
Past selections:
"2024 Crypto Market Investment Outlook"
"Ethereum will move towards $10,000, 2024 roadmap analysis!" 》
"The spring of Layer 2 is coming, what other Layer 3 projects are worth paying attention to?"
"The price will exceed $100,000 after halving!" 》
Note: All content represents the personal views of the author only and is not investment advice, nor should it be construed in any way as tax, accounting, legal, business, financial or regulatory advice. Before making any investment decision, you should seek independent legal and financial advice, including advice regarding tax consequences.
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