The background of this round of increase is essentially emotional repair rather than trend reversal.

Written by: Blockchain Knight

Bitcoin has been stuck at the $65,000 mark for a long time, and has ultimately chosen to retreat; it can be confirmed that $66,000 is not an easy barrier to hold.

The current trading volume has shrunk to nearly half of the rebound peak, and the market has entered a wait-and-see state, with all attention focused on the Federal Reserve meeting early Thursday morning.

The background of this round of increase is essentially emotional repair rather than trend reversal. Last week, the temporary ceasefire in the US-Iran conflict caused oil prices to drop rapidly, leading to a brief easing of geopolitical crises that press on risky assets, allowing Bitcoin to bounce back from its low position.

The foundation of the rebound is not solid. The US spot Bitcoin ETF saw consecutive net inflows in the first three days of last week, but a large outflow of $240 million in a single day during the second half of the week nearly offset the inflow for the whole week.

The real factor determining the market direction is the upcoming Federal Reserve interest rate decision. Following the previous surge in oil prices, market expectations for interest rate hikes have significantly heated up again.

Currently, the CME FedWatch Tool indicates that the probability of maintaining the 3.50%-3.75% interest rate unchanged at this meeting is about 70%, while the probability of a 25 basis point hike is about 30%.

Although the baseline expectation is still to hold steady, the post-meeting policy guidance, especially comments from Waller, will have a much greater impact on the market.

Although the June CPI data fell to 3.5% and core inflation decreased to 2.6%, the recent rebound in energy prices brings secondary upward risks to inflation, and more than half of the officials surveyed in the June dot plot still expect further rate hike space within the year.

New Chairman Waller is consistently data-driven, with fewer forward-looking guidance, amplifying the uncertainty of this press conference.

If he emphasizes the persistence of energy supply shocks, indicating a higher probability of rate hikes in September, even if the interest rate remains unchanged, US Treasury yields and the dollar would strengthen again.

Less than 24 hours after the decision, GDP and core PCE data for the second quarter will also be announced on Thursday evening, potentially forming a double blow to the macros.

$62,500 is the trend support line since the July rebound; once effectively broken, the rebound structure that started at the beginning of the month will be destroyed, and the market will return to a weak range, needing to test the important psychological line of $60,000 next.

This year, the market has successfully defended the $60,000 mark multiple times, forming a relatively strong bottom pattern. However, if this position fails, the June low would come back into view, and this rebound would completely become a false bottom in the downward trend.

The position changes in the options market also confirm the cautious mindset of the market. The short-term put-to-call ratio has dropped from 0.76 at the end of June to 0.52, as traders reduce recent downside protection positions, but the long-term skew for 3-6 months still remains above 11%.

This means that the market does not expect a crash in the short term, but has not completely dismissed medium to long-term risk concerns, as no one dares to be certain that this round of rebound is the starting point for a trend reversal.

Currently, the Middle East issue does not seem to be something that can be resolved in one go, so the upcoming market needs solid macro support and capital backing.

Before the Federal Reserve makes its move, the market is likely to maintain wide fluctuations, and a clear directional choice may come on Wednesday evening. However, from the platform itself, it seems the market has already made a choice ahead of time, which is what needs to be watched out for.