In the crypto world, sudden wealth and liquidation can sometimes hinge on a thought from the Federal Reserve Chair. Bitcoin sharply dropped 10% from its high of $124,000 to $114,000, causing an uproar in the market; however, this may just be the prelude to a storm. Powell's speech this Friday is very likely to become a key event that determines the fate of crypto investors this year.
The truth behind Bitcoin's crash is finally revealed.
This significant drop in Bitcoin is not due to a waning interest in cryptocurrencies but signals the retreat of large funds. On a technical level, the KDJ indicator has soared to 105, indicating that short-term upward momentum is exhausted; on a market level, the stocks of institutions that were once actively buying have suffered severe declines, revealing signs of profit-taking. The most influential factor comes from the potential shift in the Fed's policy direction.
Powell's Speech: 90% dovish expectations and 10% risk of a bloodbath
From past experience, when Powell signaled no rate hikes in 2021, Bitcoin soared; in 2022, when rate hike talks emerged, the crypto market was severely hit. Currently, U.S. inflation has dropped to 2.5%, and the unemployment rate remains at 4.1%. Powell is likely to hint at a rate cut in September, but the extent of the cut is crucial. If he hints at a 25 basis point cut, Bitcoin may rebound to 120,000; if it's a 50 basis point cut, it could aim for 130,000. However, if he is ambiguous about the rate cut, the crypto market may face an initial decline.
Even with a rate cut, it will be hard for Bitcoin to win easily.
Many believe that a rate cut will inevitably drive Bitcoin up, but this time the situation may be different. The tariffs and fiscal policies following the Trump administration could trigger inflation, weakening the benefits of a rate cut; although Bitcoin ETFs have absorbed $28.7 billion in funds, 80% of the options are bullish, with large funds betting on a rate cut, creating a risk of 'buying the expectation and selling the fact'; additionally, Bitcoin's current support level at $114,000 is precarious, and if it falls below that, the price could approach $100,000.
Investment Advice: Cautious in the short term, optimistic in the long term
In the short term, it is advisable to wait and see before Powell's speech on Friday. If a rate cut is clearly mentioned, one can consider lightly entering; if not mentioned, it could be an opportunity to buy the dip. In the long term, after the onset of the rate cut cycle, Bitcoin ETFs and institutional funds will continue to flow in, with target prices reaching $130,000, but there may be a 20%-30% pullback during this period, and investors need to hold firm to avoid being washed out.
Will Powell's speech on Friday bring the crypto world to a 'moment of life and death', or will it mark the 'starting point for sudden wealth'? Let's wait and see.
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