The cryptocurrency markets are experiencing unusual volatility. Despite the FED cutting interest rates, Bitcoin (BTC), the largest cryptocurrency, has lost value, surprising investors.
While interest rate cuts are normally expected to be a supportive signal for risky assets, this development poses a threat to the future of the current crypto rally.
In an in-depth interview with analyst Markus Thielen on The Wolf Of All Streets channel, the mixed signals and technical factors behind the market downturn were discussed.
Federal Reserve Chairman Jerome Powell's recent speeches have created significant uncertainty in the market. Powell's remarks, which included both hawkish and dovish comments, and his ambiguity regarding future interest rate cuts, have left investors bewildered.
Initially, Powell's comments suggesting that the labor market data might be exaggerated fueled expectations of further interest rate cuts, triggering a brief surge in Bitcoin to the $94,000 level.
However, Thielen notes that this rally quickly fizzled out as the Fed's official statement was perceived as “hawkish.” The committee's expectation of only one rate cut next year and one the year after signaled that the easing wouldn't be as rapid and aggressive as the market had anticipated.
Markus Thielen argues that there is a loss of momentum in the market based on technical and on-chain data. Thielen states that Bitcoin has broken out of the bull market channel it has been in since 2023 and is currently trying to hold on to its lower end. Money flowing into Bitcoin ETFs (Exchange Traded Funds), a key indicator of institutional interest, appears to have slowed significantly compared to last year.
On-chain data shows a net outflow of money from Bitcoin in December. This is the first such event since August 2023 and is considered a clear sign of market momentum loss.
According to Thielen, without more capital inflow into the market, it will be difficult for the Bitcoin price to show a rapid recovery from current levels.
Markus Thielen states that he does not expect major market movements as institutional investors close their positions before the year-end holiday season, and he forecasts a sideways consolidation.
Thielen also argues that the long-term cycle is linked to the US midterm elections rather than the halving event, but maintains that concrete money flows will be the ultimate driver of market direction.
On the altcoin front, Thielen anticipates significant selling pressure as venture capital (VC) investors unlock their locked funds (approximately $59 billion annually). He notes a lack of a strong catalyst for altcoin recovery in an environment where institutional money is predominantly focused on Bitcoin and Ethereum. He added that he prefers BNB over Ethereum due to its ecosystem advantages and return potential.
*This is not investment advice.
