BTC Faces Volatility Risk Amid Expected 25 Bps Rate Cut

Bitcoin
(BTC)
is
expected
to
face
significant
volatility
this
week
as
the
market
anticipates
a
25
basis
points
(bps)
rate
cut
by
the
Federal
Reserve,
according
to
Bitfinex
Alpha.
The
cryptocurrency
has
experienced
a
robust
recovery,
climbing
over
15%
from
its
recent
low
of
$52,756.
This
surge
has
been
largely
driven
by
a
notable
increase
in
Bitcoin
ETF
inflows,
which
recorded
$403.9
million
in
net
inflows
over
the
past
week,
reversing
a
prolonged
period
of
outflows
and
signaling
renewed
investor
confidence.

Current
Market
Dynamics

The
recent
rally
in
Bitcoin
has
been
primarily
fueled
by
aggressive
buying
in
spot
markets,
while
futures
and
perpetual
markets
have
shown
less
pronounced
movements.
This
suggests
that
the
current
price
increase
is
underpinned
by
genuine
capital
inflows
rather
than
speculative
leverage,
providing
a
more
sustainable
foundation
for
the
rally.

Resistance
Levels
and
Market
Sentiment

Despite
the
positive
momentum,
Bitcoin
now
faces
critical
resistance
levels
between
$60,500
and
$61,000,
which
have
been
pivotal
since
early
March.
Although
ETF
inflows
remain
strong,
there
are
signs
of
a
potential
stall
as
the
Spot
CVD
(the
difference
between
buy
and
sell
orders
across
exchanges)
has
flattened
over
the
weekend.
The
potential
for
market
volatility
remains
high,
driven
by
investor
anticipation
of
the
Federal
Reserve’s
rate
cut
decision.
Whether
the
cut
is
25
or
50
basis
points,
it
could
significantly
influence
market
sentiment,
swinging
between
bullish
optimism
and
cautious
de-risking.

Correlation
with
Traditional
Markets

Bitcoin’s
correlation
with
equities
is
intensifying,
suggesting
that
movements
in
traditional
financial
markets
could
increasingly
impact
Bitcoin’s
price.
Additionally,
Bitcoin
has
decoupled
from
gold,
which
reached
a
record
high
last
week,
indicating
a
shift
in
investor
preference
towards
traditional
safe-haven
assets
amidst
a
risk-averse
environment.

Inflation
and
Economic
Indicators

Asset
prices
continue
to
be
driven
by
the
inflation
outlook,
which
saw
further
cooling
in
August.
The
Consumer
Price
Index
(CPI)
rose
just
0.2%
for
the
month
and
2.5%
year-on-year,
driven
by
notable
drops
in
energy,
used
car,
and
gasoline
prices.
However,
slightly
stronger
core
inflation
could
make
the
Federal
Reserve
more
cautious
about
rate
cuts,
with
expectations
leaning
towards
a
smaller
25
basis
points
cut
rather
than
a
more
aggressive
50
basis
points
reduction.

These
developments
come
amidst
a
cooling
labor
market
with
stable
jobless
claims,
indicating
that
while
the
economy
is
decelerating,
it
has
not
reached
a
point
of
distress.
This
backdrop
of
moderate
inflation
and
stable
labor
market
conditions
reinforces
the
need
for
the
Federal
Reserve
to
act
preemptively
with
rate
cuts,
cautiously
easing
its
policy
stance.
Improved
consumer
sentiment,
highlighted
by
the
University
of
Michigan’s
Consumer
Sentiment
Index
reaching
a
four-month
high,
reflects
optimism
fueled
by
easing
inflation
numbers
and
enhanced
purchasing
power.

Global
Cryptocurrency
Legislation

In
other
significant
news,
the
UK
has
introduced
a
pioneering
bill
that
officially
recognizes
digital
assets
as
personal
property
under
British
law.
This
development
confirms
the
UK’s
status
as
a
frontrunner
in
global
cryptocurrency
legislation.
In
contrast,
the
highly
anticipated
presidential
candidate
debate
between
Trump
and
Kamala
Harris
left
many
in
the
crypto
community
disappointed,
as
it
failed
to
address
any
issues
related
to
the
taxation
or
regulation
of
cryptocurrency
markets.

The
upcoming
week
is
poised
to
be
crucial
for
Bitcoin
and
the
broader
cryptocurrency
market
as
investors
await
the
Federal
Reserve’s
decision
and
its
potential
impact
on
market
dynamics.

Source:

Bitfinex
Alpha

Image
source:
Shutterstock