- Now to assess Bitcoin’s next move as the bears take a breather.
- Whale activity suggests prospects for a possible bullish relief.
Appetite for Leverage in Bitcoin [BTC] trading exposed the inherent risks in the market when interest rates rise. In the case of BTC, many traders are being forced into liquidation so they can afford to keep track of their debt due to rising interest rates.
Is your wallet green? Check out the Bitcoin Profit Calculator
Unsurprisingly, the US Federal Reserve’s decision to keep interest rates high is tied to Bitcoin’s recent bearish sentiment. Many analysts currently expect Bitcoin’s potential upside to be limited as the FED is expected to keep interest rates high.
The Fed is not expected to cut interest rates substantially unless inflation levels fall below 2%.
It may take time for inflation to return to a favorable level. This means that interest rates may not favor a substantial Bitcoin surge (all factors held constant). However, that may be subject to government bond dumping. Such a situation could force the FED to step in and lower interest rates.
The dumping of large amounts of Treasury bonds could trigger a global margin call on levered credit positions, rapidly spiking rates in the U.S. and potentially forcing the Fed to restart QE to contain the avalanche- this time to the tune of trillions of dollars.
Recall that… pic.twitter.com/4gPTPIlayY
— Peruvian Bull (@peruvian_bull) August 21, 2023
Evaluating the opportunity to retest the $20,000 price tag
Bitcoin may be oversold after the recent crash, but that doesn’t necessarily mean more downside opportunities. Peruvian Bull’s analysis suggests there may be another wave of selling pressure before the FED cuts interest rates.
Can Bitcoin really fall from its current level? Well, the recent selling pressure lowered the level of profitability. According to Glassnode data, the percentage of Bitcoin addresses in profits is now $61.47%. This means there is even more room for another shakedown.
Source: Glassnode
The Bitcoin exchange balance has also fallen below June levels, highlighting a drop in confidence in the market. Despite the above observations and the reduced price, demand, especially from whales, remains low.
A substantial drop in price usually causes some accumulation, which in turn provides some short-term relief.
Check out the Bitcoin price prediction for 2023/2024
Let’s take a look at some on-chain findings that suggest there could be some bullish attempts in the coming days. Miner balances have increased, which meant that BTC miners chose to hodl in anticipation of higher prices. It also means things aren’t so bad as to warrant a sale. Bitcoin whales with more than 1,000 BTC (indicated in green) have been gradually accumulating since August 19.
Source: Glassnode
Meanwhile, addresses in the 10,000 BTC range rallied back to the August 13 level. This means that they got out and back in before the crash, suggesting they anticipate an uptrend. Nevertheless, these findings are subject to changes in the market. In this case, interest rate related announcements should definitely be on the list of factors.