Crypto Crisp: The Final Liquidity Crunch, Then Up Only
Following the U.S. Federal Reserve’s decision last Wednesday to lower the dollar interest rate by 50 basis points, the crypto market has responded positively. Bitcoin has climbed 5.56%, while Ethereum has surged 15.25%.
The market conditions are increasingly aligning for a major upward move. This is supported by a few key factors: historically strong seasonal trends, the post-fourth Bitcoin halving period, which has typically delivered strong returns, the potential for favorable attention on crypto during the U.S. presidential election, and, most importantly, a market that performs well in a low-interest-rate environment.
However, this week we are facing a notable liquidity crunch, as illustrated in Chart 1. Fortunately, liquidity is expected to improve in October, so we just need to get through this short-term pressure. After that, the macroeconomic conditions, such as liquidity and the lower interest rates, support the aforementioned factors in a bullish move in the crypto market.
This week will bring the last liquidity squeeze before multiple factors come together to push us higher into the fourth quarter of the year.
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