It's the familiar taste again. Bitcoin once again performed a pre-event rally, but this time, the market structure is more fragile than ever.
Just before this week's Federal Reserve policy meeting, Bitcoin has once again risen to the $91,000-$92,000 range. Looking at this green candle, I have to pour a bucket of cold water on everyone: this rebound lacks solid fundamental support, and is purely a manipulation of emotions and liquidity capture before the event.
The market has already priced in a 100% chance of this rate cut, so the real game rules do not lie in the rate cut itself, but in Powell's tone and attitude during the press conference. The past two rate cuts have shown the same pattern: a pre-event rally, a slight spike, and then a slow decline.
Now we find ourselves at a major resistance level of $92,000-$94,000, with the market looking tired and the long position ratio being too crowded.
1 Market Status: Dangerous Optimism
There is a clear contradiction in the current Bitcoin market: the apparent price rebound starkly contrasts with the internal structural weakness.
Recent data shows that Bitcoin has dropped nearly 29% from this year's historical high of $126,000. Even after a recent rebound, the market has not escaped the danger zone.
More concerning is the extremely high open interest (OI) in the futures market, with long positions holding an absolute advantage, averaging a ratio of about 2.3. This indicates that traders are generally opting for greed over safety, showing a strong tendency to go long.
This one-sided market sentiment is very dangerous. Once prices experience a slight pullback, such as 5-6%, it may trigger a chain liquidation, quickly turning small adjustments into a brutal collapse of 10-20%. Past experience tells us that a high-leverage market is like a furnace filled with dry tinder, where a single spark can ignite a raging fire.
2 The Role of the Federal Reserve: Rate cuts have been priced in, pay attention to Powell's tone
This week's financial markets are focused on the Federal Reserve's interest rate decision. However, many overlook a key point: the interest rate cuts themselves have already been fully digested by the market; what truly matters are the subsequent policy statements and Powell's remarks.
The Federal Reserve has cut rates multiple times this year, with a total cumulative reduction of 100 basis points for the year. However, market expectations for the future are more critical. Signals released by the Federal Reserve indicate that the pace of rate cuts in 2025 may be more cautious.
Powell emphasized in a recent speech, 'We are not allowed to hold Bitcoin,' clearly delineating the boundary between the Federal Reserve and cryptocurrencies. This statement sharply contrasts with Trump's supportive stance on cryptocurrencies, indicating immense uncertainty at the policy level.
Recent dovish remarks from Federal Reserve Governor Stephen Milan and New York Fed President John Williams have injected optimism into the market. However, we must recognize that there are still significant divisions within the Federal Reserve regarding whether to further cut interest rates.
3 Leverage and Market Structure: The Catalyst of a Vicious Cycle
What is most concerning about the current Bitcoin market is its internal structural weakness. High leverage has become a potential amplifier, possibly transforming small price fluctuations into massive collapses.
Coinglass data shows that during a recent market downturn, over 190,000 people in the virtual asset market were liquidated, with a total liquidation amount reaching $553 million. Among them, the liquidation amount for long positions far exceeded that for short positions, indicating that most victims were overly optimistic bulls.
Leverage can proportionally magnify losses. For example, with 10x leverage, a 10% adverse price movement can lead to the total loss of margin. During sharp market fluctuations, 'spike' phenomena may instantly breach the liquidation line, causing investors to be unable to react in time and get liquidated.
What’s even more frightening is that concentrated liquidations triggered by the plunge of a single cryptocurrency can further suppress prices, triggering more contract liquidations and creating a 'downward—liquidation—sell-off—further liquidation' cascading cycle. Once this vicious cycle starts, it is difficult to stop.
4 Strategies for Traders and Investors
In light of the current market conditions, participants of different styles should adopt different strategies.
For short-term traders, the key is to avoid FOMO (Fear of Missing Out) and not to blindly chase after green candles. Maintaining a light or neutral position ahead of significant events is a more prudent choice. As one analyst pointed out, before the relationship between the Federal Reserve and government policies becomes clear, investors need to closely monitor key indicators such as U.S. CPI data and non-farm payroll reports.
For medium to long-term investors, it is important to recognize that the medium-term outlook remains bullish, as the easing cycle will support cryptocurrencies over time. However, the timing for building positions needs to be chosen carefully; it's best to wait for the market reaction after this Federal Reserve meeting to clarify before making decisions.
The level of market panic has intensified over the past week, with the fear and greed index indicating that the market is in a state of fear. For rational investors, this may present an opportunity for medium to long-term positioning, but the premise is to control positions and risks well.
Sean McNulty, Head of Derivatives Trading for FalconX in the Asia-Pacific region, expressed similar concerns: 'What is most worrying is the negligible inflow of funds into Bitcoin ETFs and the lack of bargain hunters. We expect structural headwinds to continue this month.'
In the coming week, a series of key data will serve as an important window into the short-term direction of the U.S. economy, providing policymakers with a reference for assessing the interest rate adjustment path before 2026. Changes in this data will directly affect market expectations regarding whether the Federal Reserve will continue the current interest rate cut cycle.
The true direction will become apparent after Powell's speech. Stay patient, avoid high leverage, and wait for market sentiment to stabilize before making decisions—this may be the most rational choice at present.
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