As expectations rise for the Federal Reserve to possibly shift towards a looser monetary policy, Bitcoin prices have strengthened again, once again crossing the $70,000 mark. However, there are still significant differences within the market regarding when exactly interest rate cuts will come and the pace of such cuts.
Recently, a senior Federal Reserve official publicly expressed support for interest rate cuts, further reinforcing the market's dovish expectations. Meanwhile, Bitcoin has seen a noticeable rebound driven by continued inflows into ETFs, short covering, and a recovery in risk appetite.
However, the upcoming U.S. employment data and inflation data, as well as the Federal Reserve's next monetary policy meeting, could become key variables affecting market direction. These data will determine whether the current 'loose expectation window' can be sustained.
1. Dovish voices are emerging within the Federal Reserve
Recently, senior Federal Reserve official Stephen Milan stated that the U.S. labor market still needs more policy support, while current inflation pressures have been "generally controlled." In his view, the Federal Reserve might consider supporting economic growth through interest rate cuts.
This statement is clearly dovish and quickly boosted market sentiment, driving up risk assets including crypto assets.
However, there is not complete consensus within the Federal Reserve. Some officials remain vigilant about inflation and have even discussed the possibility of further tightening policies in previous meeting minutes.
Meanwhile, pricing in the futures and bond markets also shows that the probability of significant interest rate cuts in the short term is not high. As oil prices remain high, coupled with some stubborn inflation data, some institutions expect that the timing of interest rate cuts may be delayed, and the number of cuts may also be reduced.
In other words, what the market is trading more now is an expectation of "eventual rate cuts" rather than a confirmed easing cycle. Once a hawkish surprise occurs, market risk appetite may quickly cool down.
2. The rebound logic of Bitcoin
After several weeks of hovering below $70,000, Bitcoin recently broke through this critical level again.
Market data shows that Bitcoin briefly rose above $70,000 during the session, with a daily increase of 7% to 9%. The main factors driving this round of increase include:
1. Continuous inflow of ETF capital
The U.S. spot Bitcoin ETF attracted hundreds of millions, even over $1 billion, in net inflows in just a few trading days, showing that institutional demand remains strong.
2. Short covering drives the rise
With the price rebound, a large number of short positions were forced to close, forming a "short squeeze" market, further pushing up prices.
3. Increased leverage in the derivatives market
The number of open contracts in perpetual contracts has significantly increased, indicating that market participation and leveraged capital are on the rise.
In addition, some analysts believe that Bitcoin is gradually being seen by the market as a potential asset to hedge against inflation and geopolitical risks. If interest rate cuts release more liquidity in the future, funds may continue to flow into scarce assets like Bitcoin.
Therefore, this round of rise is not solely news-driven; capital flows and leverage structures have also played an important role.
3. Key variables to focus on next
Currently, the macro traders are most focused on the upcoming U.S. non-farm payroll data and inflation data.
If the data shows weakness, it will strengthen market expectations for interest rate cuts and provide further support for risk assets.
From a technical perspective, the vicinity of $71,000 is a very critical price area. If Bitcoin can stabilize above this level before important data is released, it may indicate that the market structure is changing.
However, if the price falls below this level again, Bitcoin may continue to fluctuate between $60,000 and $71,000.
Meanwhile, the Federal Reserve's next meeting and any statements about future interest rate paths will also directly affect market liquidity expectations and the dollar's trend, thereby influencing the crypto market.
Conclusion
Overall, Bitcoin's recent rise essentially reflects the market's expectations for the future liquidity environment.
On one hand, voices supporting interest rate cuts are starting to emerge within the Federal Reserve; on the other hand, the overall policy path still highly depends on economic data.
For the crypto market, Bitcoin is more about betting on the future liquidity and inflation environment, rather than just a short-term response to a specific policy statement.
Therefore, the three factors worth paying close attention to next include:
U.S. employment and inflation data
Bitcoin ETF capital flow
$60,000 to $71,000 is a key price range
Compared to any single policy statement, these factors may better determine the trend of Bitcoin in the coming period.