Bitfinex analysts observed that the Bitcoin price might have reached a local bottom and is showing signs of stability. After a period of high volatility, the leading cryptocurrency by market value seems to be finding its place above the $59,000 mark. This development came after a notable drop last Wednesday when Bitcoin fell below its 120-day range to $53,219 due to market reactions to potential sales by the German government and Mt. Gox creditors. Despite this drop, Bitcoin has recovered, although daily price fluctuations remain a factor.
Positive Data for Bitcoin
Derivative market data provides further insights into this stabilization. Bitfinex analysts highlight that the gap between the current price and historical volatility has narrowed by almost 90%. This narrowing gap indicates that investors are beginning to expect Bitcoin prices to stabilize within a certain range. Additionally, although there is a lack of conviction in both directions in the options market, stabilization signals are becoming more apparent.
Short-term price volatility has started to decrease, and long-term holders continue to make profits. According to analysts, the short-term selling pressure might be nearing its end. Accordingly, the Spent Output Profit Ratio (SOPR) for short-term holders stood at 0.97. This level indicates that this group is now selling at a loss. Historically, such conditions have led to price recoveries as selling pressure decreases, offering a potentially optimistic outlook for the near future.
Expectations for Interest Rate Cuts
In a broader economic context, the latest estimate from Citi Bank suggests that the US Federal Reserve may implement a series of interest rate cuts next year. Citing deflationary data, Citi analysts predict that the Fed could reduce interest rates by 25 basis points in eight consecutive meetings starting in September and continuing until July 2025.
This would significantly lower the benchmark interest rate from the current range of 5.25%-5.5% to 3.25%-3.5%. This estimate aligns with signs of economic softening, including a temporary decline in service employment and dovish comments from Fed Chairman Jerome Powell.
These economic indicators and forecasts will play a crucial role in shaping market expectations and investor sentiment. As indicated by the Chicago Mercantile Exchange (CME) FedWatch tool, the increased likelihood of an interest rate cut in September has already influenced the outlook of those trading on the possibility of a series of rate cuts. The probability of such cuts rose from 71% to 73.6%, reflecting a growing consensus on the need for monetary easing.
