Bitcoin Bulls Retake $90K as Fed Rate Cut Odds Increase

Temporary Recovery or Full-Scale Reversal? The Next Days Will Tell

A December rate cut is back on the table, and Bitcoin is back on the rise after a major drop that saw it change hands as low as $80,537. The $80K low was reached last Friday, when Bitcoin was the cheapest it’s been since April. The current week has been kind to Bitcoin bulls thus far, with an overall risk-on attitude, which was mostly triggered by the increasing odds of a rate cut by the Fed in December.

According to the CME FedWatch tool, the chances of a 25-bps cut stand at 85% at the time of writing. This is a huge increase from a week ago, when those odds were just 39%. The CoinMarketCap Fear and Greed index sits in “Extreme Fear” territory, with a reading of just 18 at the time of writing. Although this is very low, it has shown signs of increase (it was 10 on November 22).

Inflows into spot Bitcoin ETFs are ticking up again, with $128 million on Tuesday, followed by just $21 million on Wednesday. Although this sounds low compared to late-summer numbers, it is still an improvement from recent days. To put things into perspective, Bitcoin spot ETFs bled more than $903 million on November 20.

Chart Analysis – BTC/USD

Immediately after reaching its All-Time High (ATH) above $126K, Bitcoin entered a downtrend and has struggled to find a bottom ever since. It is very important to see if the current bounce is a recovery after an oversold condition, or if a bottom is in. If the latter option is true, then we are likely dealing with a reversal of the downtrend, not just a temporary rally.

The pair was oversold last week but exited that territory earlier this week, coinciding with the current rally from $80K to above $90K. This oversold event is very important because it’s the first time RSI has entered this extreme condition since February. Soon after that, Bitcoin soared from around $75K to its current ATH above $126K.

It’s worth noting that the price moved lower after the initial oversold condition of the RSI (back in February), and created bullish divergence. At this time, there is no divergence present, and Bitcoin has not established a good support structure, so there’s no clear buy signal, although the macro environment shows signs of improvement.

As long as Bitcoin stays above the $88K – $90K support zone, there’s a good chance that a bottom is established. If this is the case, the next destination will be $100K, which is a major psychological and technical level. If that battle is won by the bulls, the chances of uptrend resumption will increase.