The Fed Hints at Rate Cuts, Bitcoin Surges to $62,000, but Future Trajectory Remains UncertainA potential rate cut hinted at by Federal Reserve Chair Jerome Powell on Friday sent Bitcoin prices soaring past $62,000. However, the short-lived price surge also triggered a liquidation of over $21 million in short positions within an hour, coupled with some long liquidations
The Fed Hints at Rate Cuts, Bitcoin Surges to $62,000, but Future Trajectory Remains Uncertain
A potential rate cut hinted at by Federal Reserve Chair Jerome Powell on Friday sent Bitcoin prices soaring past $62,000. However, the short-lived price surge also triggered a liquidation of over $21 million in short positions within an hour, coupled with some long liquidations. Technical analysis reveals a neutral sentiment, suggesting that Bitcoin might consolidate in the short term.
Powell's speech at the Jackson Hole Economic Symposium mentioned the possibility of lowering interest rates, propelling Bitcoin prices upward within an hour. Previously, Bitcoin had been trading around the $60,000 mark.
In his speech, Powell highlighted the Fed's continued focus on inflation and maintaining a robust labor market. He stated: "Our goal is to restore price stability while maintaining a strong labor market, avoiding a sharp increase in unemployment that would occur if inflation expectations became unanchored."
The release of Consumer Price Index (CPI) data last week, indicating a slowdown in inflation, further strengthened the case for a Fed rate cut. Powell's statement on interest rate reductions appeared to be the key factor driving Bitcoin's price surge. He reiterated: "It is time now for policy adjustment. The policy direction is clear, and the timing and pace of adjustments will depend on incoming data, evolving prospects, and risk balances."
According to Coinglass data, approximately $27 million worth of positions were liquidated within an hour following Powell's statement. Liquidations occur when traders fail to meet margin requirements on their contracts, forcing exchanges to close positions to prevent further losses. Over $21 million in short positions were liquidated, while long liquidations amounted to slightly over $5 million. Short positions bet on price declines, while long positions anticipate price increases.
The significant liquidation of short positions triggered by Bitcoin's rapid breakthrough of $62,000 signifies the market's sensitivity to rate cut expectations.
However, the daily chart reveals Bitcoin falling below $61,000, indicating that the price surge might have been short-lived. The Relative Strength Index (RSI) hovers near the 50.00 neutral line, suggesting market participants are largely adopting a wait-and-see approach.
The RSI measures momentum, with rising readings indicating strong bullish momentum and falling readings suggesting bearish momentum. The current reading suggests that market participants are largely taking a neutral stance, and Bitcoin may continue to trade sideways.
Furthermore, Bitcoin's price is currently nearing the $61,350 supply zone. While the coin maintains a lower high, it suggests that the likelihood of another upward trend is not significant.
If Bitcoin rebounds, the next target could be $62,290. However, resistance from the supply zone might stifle bullish momentum. If this occurs, Bitcoin could potentially fall to $59,939.
In conclusion, the Fed's hint of rate cuts sparked a substantial surge in Bitcoin prices, but this was a transient fluctuation. Technical analysis reveals a neutral sentiment, suggesting that Bitcoin might consolidate in the short term. The future trajectory will depend on the Fed's policy adjustments and the market's response to rate cut expectations.
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