Bitcoin recently experienced a significant downturn, falling to $88,000 on Monday. However, it swiftly rebounded above $90,000, signaling a strong recovery to investors. Despite a minor pullback within the last 24 hours, various indicators suggest that the upward trend may continue.
Fed’s Dovish Approach Revitalizes the Crypto Market
The primary catalyst for this resurgence is the U.S. Federal Reserve’s decision to cease quantitative tightening. The anticipation of a 25 basis points interest rate cut following next week’s FOMC meeting is strengthening. This dovish stance by the Fed makes high-risk investment channels more attractive to investors, potentially bringing new capital into the cryptocurrency market. However, it remains uncertain if this influx will be strong enough to propel Bitcoin to new heights.
Crypto analyst Axel Adler has revealed that a key indicator in Bitcoin’s derivatives market is signaling bullish momentum. According to Adler, the Bitcoin Futures Market Power index reaching 56.5 is a sign of upward trend readiness. This metric measures pressure in the Bitcoin derivatives market by combining open interest, funding rates, and the buyer-seller balance. An index reading above 60 would confirm a strong rally, whereas a dip below 50 could indicate a return to a bearish zone.
On-Chain Data Hints at Market Bottom
On-chain indicators suggest Bitcoin might have established a local bottom. The persistently positive reading of the Coinbase Premium Index since November 28 highlights increased spot demand from U.S.-based investors. This metric, tracking price differences between Coinbase and Binance, is particularly positive during periods of institutional buying from the U.S.
Meanwhile, the Coin Days Destroyed (CDD) indicator, which monitors long-term investor behavior, has been relatively calm over the past ten days. Sharp rises in CDD typically indicate profit-taking by long-term holders. The current calm suggests these investors have not yet initiated large-scale selling.
Additionally, a recent Galaxy Digital analysis noted an acceleration in spot Bitcoin ETF inflows in the year’s final quarter, playing a crucial role in price support. This revival, combined with on-chain data, indicates a strengthening market.
Market Outlook and Future Considerations
In conclusion, the current landscape reveals cautious optimism in the Bitcoin market. The Fed’s upcoming interest rate decision, ETF inflows, and stable on-chain metrics suggest the possibility of a new bullish cycle. However, certain technical analysis outputs, such as Elliott waves and volatility measures, indicate price fluctuations around the $90,000 mark. Therefore, while the potential for a robust rally is increasing, confirming a structural bull trend remains premature without stability above $106,000.