As per CME’s Fed Watch, there was a 96% likelihood of the Federal Reserve decreasing rates by 25 basis points (bps) during their December interest rate verdict.
This percentage has risen from 89% within the past 24 hours and was at 65% a month ago at this present moment.
While the chances of a rate cut of zero bps were only at 5%, the probability of a rate cut exceeding 25 bps stood at 1%, indicating slim expectations for such outcomes.
If the Federal Reserve decides to cut rates due to lower inflation rates, particularly outside the housing sector where total inflation remains slightly above the target due to housing costs, this move could potentially benefit alternative investments like Bitcoin [BTC].
Historically, lower interest rates have made cryptocurrencies more appealing by reducing the attractiveness of assets that yield returns, fostering increased liquidity and allowing institutions to borrow at lower costs.
Therefore, a potential rate cut could signal a positive view for Bitcoin, indicating that it might continue to rise as more capital flows into the digital asset.
Breakout from a Continuation Formation
Observing BTC’s 4-hour chart, it was observed to have consolidated within a symmetrical triangle pattern, which is indicative of a continuation formation, supporting the idea of a continued rise.
Bitcoin’s recent performance corresponds with the belief that future Federal Reserve rate cuts could further drive its value up.
The price displayed increasingly smaller fluctuations between the converging trend lines, suggesting a period of consolidation before a breakthrough. The breakout towards an upward direction implied a positive continuation.
With expectations of rate cuts from the Federal Reserve, which could negatively impact the US dollar, Bitcoin may become a more attractive option for seeking higher returns. If the projected rate cut comes to fruition, it may push Bitcoin’s price up even higher as investors turn towards the digital currency seeking better profits.
Liquidations and BTC MVRV Ratio
Data from Coinglass indicates a significant concentration of leveraged orders at risk of liquidation around Bitcoin’s current price across various exchanges such as Binance, OKX, and Bybit.
If Bitcoin surpasses the $105K mark, there is a possibility of over $4.1 billion worth of Bitcoin shorts facing liquidation, potentially intensifying the upward trend as short sellers are forced to cover their positions.
The collective long liquidation leverage for Bitcoin has been steadily climbing, showing an increase in momentum.
Further examination of the MVRV ratio reveals a value of 2.53, suggesting that Bitcoin’s market price is roughly 2.53 times higher than its realized value.
This ratio experiences fluctuations, peaking during periods of high market optimism before stabilizing or decreasing during corrections.
It’s worth noting that the MVRV ratio has not reached the extreme highs seen in previous cycles, indicating that Bitcoin may not have reached its market peak yet.
If the Federal Reserve proceeds with interest rate cuts, it could spark greater interest in Bitcoin, potentially boosting both its price and MVRV ratio as more capital flows into the market. This outlook remains positive without immediate indications of a market peak.