Fed Decision Countdown, Bitcoin Faces "Life or Death Test": Will Whales Retreat or Power Up?

July 27th. Bitcoin will face a combination of macroeconomic factors this week, with the market focusing on the Federal Reserve interest rate decision, U.S. inflation data, and the development of the U.S.-Iran situation, as investors prepare for potential volatility.

The Federal Reserve will announce its latest interest rate decision on July 29th. Due to inflationary pressures and geopolitical risks, the market is repositioning for a possible interest rate hike. CME FedWatch data shows that the current market estimates the probability of a rate hike this week to be about 31%, and the probability of a rate hike at the September meeting has risen to 50% at one point.

The U.S. 2-year Treasury yield rose to 4.3% last week, further reinforcing expectations of a tightening policy. However, as the U.S. and Iran paused military actions, oil prices fell by about 8% in early Monday trading, leading to a slight cooling of the interest rate hike expectations.

In addition to the interest rate decision, the market will also focus on the June Personal Consumption Expenditures (PCE) inflation data to be released on July 31st. Previously, the May PCE year-on-year growth rate reached 4.1%, a three-year high. The market expects the June data to potentially fall to around 3.7%.

Meanwhile, the correlation between Bitcoin and U.S. stocks continues to decline. TradingView data shows that the BTC/USD correlation with the S&P 500 Index is currently near its lowest level since March, with a correlation coefficient with the Nasdaq Index of only 0.11. However, if macro risks increase, these two types of risk assets may still resynchronize their volatility.

On-chain data shows that the trend of whale funds flowing into Bitcoin exchanges is cooling off. CryptoQuant data shows that since June 12th, the amount of BTC flowing from whales to Binance has decreased by about 44%, and retail inflows have decreased by about 22%. Currently, retail inflows are about twice that of whales, with a difference of $3.9 billion.

In terms of price, Bitcoin briefly touched $65,680 over the weekend before continuing to test the resistance of the 50-month moving average. Analyst Rekt Capital stated that the current BTC price is sandwiched between the 200-week moving average and the 50-month moving average, and continued compression may eventually lead to significant volatility.