Bitcoin has seen its price stabilize around $61,564.96, following a period of significant fluctuation that saw the coin surpass its previous highs. Despite this achievement, the market has entered a phase of sideways trading, raising questions about the catalysts needed to break this pattern. This analysis explores the current state of the Bitcoin market, underpinned by a mix of economic indicators and market behaviors, drawing insights from CryptoQuant’s recent analysis.
In the past year, slight increases in global liquidity appeared to benefit Bitcoin, but the rapid expansions historically associated with substantial increases in the global money supply (M2) have not materialized in the current cycle. As of early this year, the year-over-year change in M2 has leveled off to neutral levels. This adjustment follows persistent inflation data in the U.S., which has resulted in a shift in market expectations for interest rate cuts in 2024, scaling back from five predicted cuts to just two.
The market’s reaction to these macroeconomic factors has been notably muted compared to previous cycles. Typically, Bitcoin’s most significant rallies have aligned with periods of increased liquidity and strong investor risk appetite. However, this dynamic has shifted, with the market now waiting for new triggers that might influence a decisive movement.
On the supply side, the decrease in selling pressure is notable, particularly among Long-Term Holders (LTHs) who have experienced price stabilization at around $60,000. Short-Term Holders (STHs) have also reduced their sales, largely due to decreased profitability amid the current price levels. This reduction in selling activity has contributed to the market’s lateral movement, awaiting significant shifts in economic indicators or investor sentiment.
Market analysts suggest that a more favorable macroeconomic setting, potentially emerging around the expected U.S. interest rate cut in September, could catalyze a new wave of demand and trigger a subsequent rally. This rally could mark the peak of the current cycle, according to projections based on the current market structure, including factors such as profitability, leverage, and the age distribution of coins.
The upcoming U.S. inflation data, expected later this week, is anticipated to be a pivotal factor that may reshape market expectations regarding short-term monetary policy. These expectations are critical as they influence investor sentiment and can either bolster or dampen market activity significantly.
