As Bitcoin (BTC) consolidates after breaking out of its bull flag, the environment ahead for the number one cryptocurrency looks promising. Federal Reserve rate cuts are expected to be made going into the end of this year and through the first half of 2025. This monetary easing is likely to help Bitcoin to thrive.
A change in market sentiment
Market sentiment for Bitcoin is very different right now. The $BTC price put on more than 9.5% over the last three days, equating to a dollar gain of $5,900. The Fear and Greed Index, which measures market sentiment, spiked from registering Fear at 39 only last week, to Greed at 71 currently.
All this new-found positive market sentiment will probably have been sparked by a combination of factors. However, one factor that is really making the difference is the amount of liquidity that is being pumped into the monetary system, and the increasing liquidity that is predicted to arrive over the coming months.
Rate cuts are coming
Goldman Sachs has been quoted as saying that it expects the Federal Reserve to deliver 25 basis point rate cuts consecutively from November all the way through to June, a process which would terminate with the Fed rate at 3.25-3.5%.
Pauline Shangett, CMO of cryptocurrency exchange ChangeNOW, commented:
"Similar to the growth in U.S. stocks, the positive price movements in the crypto market are likely influenced by favorable economic data from China and the U.S., along with recovering investment demand. This strengthens forecasts for a potential future interest rate reduction by the Federal Reserve,"
On the recent surge in the Bitcoin price, Shangett observed that the path to $70,000 is now open. She added:
"The next resistance level could be at $73,000, and breaking through it may trigger significant buying, pushing BTC towards $80,000-$86,000."
$BTC overbought - rolls over on short term time frame
Source: TradingView
The short term time frame for $BTC (BTC/USD) shows that the price is starting to roll over, having tagged the 1.618 Fibonacci for this recent move. Indicators suggest that $BTC is very overbought currently, and therefore a period of sideways consolidation could be likely.
Nevertheless, the fact that the $BTC price has broken out of its bull flag, and is holding above, bodes well for positive future price action. If the price does break back down into the bull flag, the Fibonacci levels at $66,000 (0.236), $64,800 (0.382), and $62,500 (0.618) would likely act as supports.
Weekly close above the bull flag is crucial
Source: TradingView
The weekly time frame reveals that $BTC is certainly not out of the woods yet. The Fibonacci levels for the entirety of the bull flag show that the $BTC price has just hit the 0.786, which is acting as resistance. Given the current overbought conditions, it might be expected that the price comes back down to test the top of the bull flag at least, and perhaps return to retest the 0.618 Fibonacci level, if this does indeed become support.
What will be crucial for the $BTC bulls, is that the price maintains above the bull flag trend line by the end of this week. A weekly close below would undo all the work done in order to get to this position, and would likely signal a return to much lower levels.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
