Anika Begay
While Bitcoin and major altcoins are stable at press time, the sharp sell-off from the weekend to August 5 has led to a major shake-up. Billions in leveraged positions have been liquidated and prices are technically under pressure despite the current stability.
Global Liquidity Set to Increase Rapidly: Will Bitcoin Benefit?
However, despite the risks of Bitcoin, Solana, Ethereum and others falling to multi-week support levels, an analyst at X thinks the market is ready for a recovery.
In a post, he explained that the US Federal Reserve, the central bank, plans to change its monetary policy in the coming weeks, which would automatically mean the start of money printing.
While the crypto community had been expecting the Federal Reserve to begin cutting interest rates, which are currently at multi-year highs, the decision to postpone the move means rates are still higher than expected.
For now, the US central bank probably… cut rates to 5% at the next FOMC meeting, which It’s set for September. The analyst also said that the Federal Reserve will start a Treasury bond buyback operation when that happens. Through this initiative, the government will inject about $30 billion into the economy per month.
The decline in interest rates and the buyback program will significantly stimulate global liquidity. Historically, and particularly in the events of 2020 and 2021, when governments around the world intervened to curb the impact of the COVID-19 virus, global liquidity increased sharply.
Rising in tandem, the prices of Bitcoin and cryptocurrencies have soared to multi-year highs. Investors in particular have flocked to Bitcoin during that rally, citing its inherent scarcity and the coin’s likelihood of preserving value.
Currently, global liquidity is now TO over 106 trillion dollars. It will continue to rise, a positive factor for Bitcoin and for liquid but deflationary digital assets.
Caution Must Prevail: BTC Finds Support at $50,000
However, traders need to be cautious. Bitcoin remains volatile and no tool can accurately predict when prices will drop.
Immediate support is at $50,000, a round number. However, if there is a recovery and prices rise above $60,000, bulls may be encouraged to double down, recharging exhausted buyers.
Even amid this turbulence, institutions remain bullish on Bitcoin’s prospects. Following MicroStrategy’s methods, Semler Scientific purchased $6 million worth of Bitcoin on August 5. The firm has owned 929 BTC since it began purchasing in May 2024.
Feature image from Canva, chart from TradingView
