Bitcoin regains balance: Fed tailwinds vs trade turbulence

Bitcoin prices are steadying after another volatile session on Tuesday, as investors way up, escalating US-China trade tensions against growing conviction that the Federal Reserve will cut interest rates again in October. 

Yesterday, Bitcoin fell to a low of 109k before recovering some ground to 112.5K at the time of writing. Major altcoins were also pausing after a volatile start to the week. Ethereum recovered from a low of 3890 yesterday to trade back above 4100 today, and Solana trades back above 200, after falling to a low of 173 at the weekend. 

Fed rate cut optimism offers support 

After a rough few days, the mood is showing signs of improvement after Federal Reserve Chair Jerome Powell gave his strongest hint yet that the Fed would cut rates again in October.  Highlighted the weakness in the US labour market rather than inflationary risks. He noted that despite the lack of fresh Bureau of Labor Statistics data, there was enough evidence from private job measures and the Fed’s internal research to indicate the jobs market was cooling. 

The market now expects the Fed to deliver back-to-back rate cuts with a 93% probability of 50 basis points worth of rate cuts before the end of the year, up from 79% a week ago. 

The cryptomarket is in need of a Fed tailwind after the recent volatility, which saw prices plunge on Friday and over the weekend on a combination of US-China trade worries and a cascading liquidation event, the largest in crypto history. 

While the mood remains cautious following crypto’s largest ever liquidation event, which saw $20 billion wiped out, the fundamentals that had supported Bitcoin’s long-term trajectory remain unchanged. Institutional demand remains solid with BTC ETFs recording $4.78 billion in inflows this month. Furthermore, the massive liquidity and deleveraging event could pave the way for a firmer base, laying the groundwork for renewed upside momentum, although patience will be key. 

Shifting attention back to the Fed, and more rate cuts will likely be supportive. However, gains in the near term could be limited by US-China trade tensions. Trump threatened to end some cooking oil business with China after Beijing refused to buy US soybeans. This comes after both sides raised taxes on cargo vessels on Tuesday. Trump and Xi Jinping are due to meet later this month. 

BTC technical analysis 

After reaching a record high of 126.1k, BTC fell lower, but has found support on the rising trendline. However, the recovery faced rejection at the 50 SMA around 115k. 

If sellers break below the rising trendline and the 110k round number, they could target testing 107K, the 200 SMA, and the September low. 

Should the trendline support hold, buyers will need to rise above the 115k resistance to create a higher high. 

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