Federal Reserve Cuts Interest Rates: Bitcoin’s Future by Analysing Key Metrics

The Federal Reserve’s recent 50 basis point interest rate cut has sparked a range of reactions. Some argue that the cut was too aggressive, especially with Japan’s potential interest rate hike looming in September/October. They predict this could cause a crash, possibly sending Bitcoin (BTC) prices below $50K. Others, however, see the move as extremely bullish, believing that Bitcoin may never revisit the $58K level again.

In this blog, I will explore some key metrics to watch over the coming days to help gauge where the market might be heading.

Bitcoin’s Current State and Risk Analysis

1. Bitcoin’s Struggle with the Bull Market Support Band

Bitcoin is currently hovering between the Bull Market Support Band, which consists of the 20-Week Simple Moving Average (SMA) and the 21-Week Exponential Moving Average (EMA). It's crucial for Bitcoin to break above this band and sustain that position to signal a potentially bullish trend in the months ahead. As of now, the 20-Week SMA is at $62.7K, while the 21-Week EMA sits at $60.56K.

2. Bitcoin’s FOMO Level

A key price level to watch is $61.57K. If Bitcoin can hold above this level, it could trigger a Fear of Missing Out (FOMO) sentiment in the market. This value is calculated based on the historical price level that Bitcoin has managed to stay above only 3% of the time. In recent months, Bitcoin has struggled to remain above this threshold, but if it does, we could see rapid price increases, potentially in the range of 1x-4x.

3. Short-Term Risk for Bitcoin

In the short term, Bitcoin’s risk level appears to be cooling off. This is measured by dividing the current Bitcoin price by its 20-week SMA. Currently, it's below the green line, which is a positive sign, suggesting that any future dips may not be too severe. As we move towards Q4, this setup could pave the way for a bullish 2025.

4. Bitcoin’s Current Risk: Using On-Chain and Off-Chain Data

Bitcoin’s overall risk level currently stands at approximately 31% (0% being the lowest and 100% the highest). This means both on-chain and off-chain data are not signaling any significant concerns for Bitcoin at this time. High-risk levels typically above 80% indicate an impending crash, but we are far from that threshold. While short-term fluctuations may occur due to news or events, the medium-to-long-term outlook remains promising. Additionally, Bitcoin is currently trading below its Power Law "fair value" trendline ($74K), suggesting it is undervalued at present.

5. Retail and High-Net-Worth Investors’ Behavior

Looking at addresses holding between 0.1-1 BTC and 100-1K BTC, accumulation has reached a yearly high since the start of 2024. This signals growing interest from both retail and high-net-worth investors, likely as they prepare for the 2025 cycle peak. Institutional interest is also on the rise, evidenced by significant inflows into Bitcoin spot ETFs. Notably, BlackRock’s spot ETF achieved the most successful launch in history.

The Road Ahead: Global Liquidity and Market Risks

Bitcoin’s current metrics are very positive. With global liquidity expected to increase through 2025 and quantitative easing likely to start soon, this creates the perfect setup for an explosive run. However, there is one potential blind spot in the market: the aftermath of carry trades in Japan when interest rates were near zero. With Japan’s potential rate hikes in October, this could shake up the market and liquidate over-leveraged positions. Therefore, it’s important to monitor these key metrics to gauge the market’s strength and its ability to absorb any shakeout.

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