Key Insights:
- Bitcoin surged above $105,000 amid speculation of Fed interest rate cuts after Powell’s remarks.
- Powell’s emphasis on economic modeling and risk management shows a more flexible Fed stance that could benefit risk assets like Bitcoin.
- Cooling inflation and a stable labour market indicate that the FED could indeed be considering rate cuts.
Bitcoin recently broke above the $105,000 mark, amid the wave of optimism around possible interest rate cuts from the U.S. Federal Reserve.
The rally was triggered by Fed Chair Jerome Powell’s recent comments at the 75th anniversary of the Fed’s International Finance (IF) Division.
During this meeting, Powell pointed out the part that economic modeling plays in assessing macroeconomic uncertainty.
While Powell didn’t explicitly promise any kind of monetary easing, his tone and phrasing showed that interest rate cuts could be on the horizon if the ongoing economic trends persist.
Here’s how this could fuel a new all-time high for Bitcoin.
Powell’s Remarks Show Incoming Flexibility
At the event, Powell focused on the importance of modeling international finance and economic uncertainties. He emphasized how these tools help the Federal Open Market Committee (FOMC) make better decisions.
Even though he announced no formal policy changes, his repeated references to scenario analysis and risk management have been interpreted by analysts as a signal that the Fed is preparing to change its stance. For crypto investors, this was a green light.
Any move toward lower interest rates would likely weaken the U.S. dollar, which is a trend that has always benefited risk-on assets like Bitcoin. As a result, traders quickly rotated funds into the crypto market and prices turned green.
Macroeconomic Conditions Support a Bullish Outlook
What’s driving this shift in sentiment isn’t just Powell’s speech. It is the general macroeconomic backdrop. The latest Consumer Price Index (CPI) shows annual inflation at 2.3%. This trend is also inching close to the Fed’s target of 2%.
Meanwhile, the unemployment rate remains stable at 4.2%, and is showing a resilient labor market. This blend of declining inflation and strong job numbers gives the Fed more flexibility to consider rate cuts without risking economic overheating.
According to analyst Kyle Chassé “Rate cuts on the table later this year. That’s rocket fuel for Bitcoin.”
And it’s not just words. According to CoinMarketCap, Bitcoin hit $105,568 shortly after Powell’s remarks. Even though the 24-hour gain was just 0.62%, the move above $105,000 is seen by many as a bullish breakout.
Bitcoin as a Hedge Against Uncertainty
More than mere rate cuts and macroeconomic numbers, there is an increasing narrative around Bitcoin being used as a hedge against both inflation and a weakening dollar.
This is especially true in the current environment, where traditional financial systems are more vulnerable to policy shifts.
Investors are more and more looking towards crypto and other risk assets as a way to protect their wealth. This means that if the dollar continues to slide, Bitcoin could become an even more attractive store of value. Therefore, prices could rise indeed.
Technical Signals Point to More Upside
The fundamentals are strong, but what do the charts say? Technical analysts are leaning bullish, like TradingShot, a well-known trading strategist.
The analyst recently noted that Bitcoin has bounced off its 4-hour 200-period moving average. Keep in mind that the cryptocurrency has respected this price level since mid-April. The bounce was further followed by the formation of an “Arc pattern” on the four-hour chart.
In addition, the Relative Strength Index (RSI) on the daily chart dipped into oversold territory recently.
This shows that Bitcoin may be due for a short-term reversal to the upside, as buyers tend to step in when the market is showing signs of exhaustion.
According to TradingShot, if Bitcoin can break above its 4-hour 50-period moving average, we could see a 16% rally that takes the price to around $120,000.
Other analysts, like trader El_crypto_prof, have identified $102,000 as a very important buy zone, while pointing to $97,000 as an equally important support level that needs to hold by all means.
Can Bitcoin Reach $120,000?
With the ongoing macroeconomics and technical setups aligning, many analysts believe a move toward $120,000 is not only possible but even probable.
These analysts believe that breaking above current resistance levels could create a fresh supply of buying interest, especially if institutional investors interpret the Fed’s tone as a signal to increase risk exposure. That said, Bitcoin still faces several more hurdles in the short term.
