Original source: Bitpush
Financial asset prices trended higher on Thursday as new U.S. inflation and labor data further supported expectations that the Federal Reserve will begin cutting interest rates next week.
The U.S. Producer Price Index (PPI) report for August showed that wholesale prices rose 0.2% month-on-month, slightly higher than economists' expectations, and rose 1.7% year-on-year, in line with expectations.
The market generally expects the Federal Reserve to cut interest rates by 25 basis points next week, but some traders still hold out hope for a 50 basis point cut. The Chicago Mercantile Exchange (CME)'s FedWatch Tool gives a 28% probability of a 50 BP cut, up from 14% yesterday.
The three major U.S. stock indices closed higher, with the S&P, Dow Jones and Nasdaq rising 0.75%, 0.58% and 1.00% respectively. Spot gold surged 1.91% intraday to a record high of just under $2,560 per ounce.
According to Bitpush data, Bitcoin (BTC) soared above $58,000 in early trading on Thursday. After falling to a low of $57,310 in the afternoon, bulls successfully pushed the price back above $58,000 in the afternoon, challenging the resistance level of $59,000.
As of press time, Bitcoin is trading at $58,217, up 1.53% in the past 24 hours.
In the Altcoin market, the top 200 tokens by market capitalization generally rose. The largest increase was Worldcoin (WLD), up 14.6%, followed by Trust Wallet Token (TWT), up 14.3%, and Sui (SUI), up 13.9%. The largest decrease was GMT (GMT), down 6.2%, SuperVerse down 5%, and ConstitutionDAO (PEOPLE) down 4.3%.
The current overall market value of cryptocurrencies is $2.05 trillion, and Bitcoin’s market share is 56.3%.
Expected volatility
Market analyst Bloodgood said that the CPI and PPI inflation data released this week were not much different from forecasts, and the Federal Reserve seemed to be about to enter a fairly orderly rate cut cycle, which should be very beneficial for risky assets.
Bloodgood noted that historically, rate cuts “tend to be accompanied by some initial downside volatility, but that should be muted given the upcoming election. Barring some truly unexpected economic developments, the macro outlook for the fourth quarter remains fundamentally bullish.”
Regarding Bitcoin, Bloodgood noted that since last week, the price of Bitcoin has fallen to around $50,000, but bulls stepped in to “save the situation” because this time “the pullback is not as fast as in early August, which shows that bears are exhausted.”
Bloodgood concluded: “At the time of writing, BTC is sitting just below the breakout zone, which is a key point in the recent trend. A breakout of this level would quickly lead to higher levels, while a breakout would make a test of $50K very likely in the coming weeks. From my perspective, the structure remains bearish, so I wouldn’t get my hopes up until lower highs are broken.”
TradingView analyst TradingShot said that interest rate cuts will lead to an increase in global money supply, which may be the factor driving the next round of Bitcoin's rise.
“As the Federal Reserve prepares to cut interest rates next week for the first time since the start of its rate hike cycle in February 2022, it will be very interesting to see what the global money supply and more currencies in circulation mean for Bitcoin,” TradingShot said.
In the above chart, the light green and red candles (top) represent the Global Liquidity Index (GLI), which is composed of the Federal Reserve, TGA, RRP, ECB, People's Bank of China, Bank of Japan, Bank of England and other central banks. This chart tracks and measures liquidity/money supply/currency circulating in global economies.
TradingShot said: “When central banks cut interest rates, they are actually printing more money, injecting a lot of cash into the system, causing the currency in circulation to depreciate. When this happens, it becomes easier for businesses and/or individuals to obtain more funds through means such as loans, thereby increasing their spending/purchasing/investing ability. In principle, this means that investors are more likely to buy riskier assets, causing the value to rise. Stocks and cryptocurrencies fall into this category.”
TradingShot analyzed: "As this chart shows, it is not surprising that whenever GLI starts to rise, Bitcoin (the bottom candle) will rise. More specifically, when liquidity decreases and stabilizes, a bear market cycle for BTC is formed, and when it breaks through the resistance level, BTC will begin the rebound phase of its bull market cycle. After the Fed's sharp interest rate hikes caused us to return to the level before the 2008 real estate crisis, GLI experienced a stronger decline. Instead of flattening out, it formed a wedge with lower highs as resistance. GLI is now right on this lower high trend line. If it is broken, we may have a breakthrough similar to the resistance breakthrough of the previous cycle, triggering a parabolic rebound in Bitcoin."
Analysts at Secure Digital Markets believe that Bitcoin has rebounded from the $56,600 support level, a move that is consistent with the bullish crossover observed on the 4-hour chart, where the 20-day and 50-day exponential moving averages (EMAs) intersect. In addition, oscillators on the same time frame show a bullish divergence, signaling a possible upside reversal in the short term. But while technical indicators can provide insight into trends, these indicators alone are not enough to accurately predict future trends, and it remains to be seen whether the rebound will push Bitcoin above the $60,000 mark and reach the upper limit of the six-month trading range.
