Bitcoin wants a recovery as it approaches the key support level

• Bitcoin is approaching the key daily support level of $56,000, eyeing a recovery.
• Microstrategy Announces $700 Million Private Offering to Repurchase Debt and Buy Bitcoin.
• CME Group data predicts a greater than 69% chance of a 50 bps rate cut by the US Federal Reserve on Wednesday.

Bitcoin (BTC) is showing signs of recovery and is rising above $59,000 at the time of writing on Tuesday, following a three-day slide after failing to close above $60,500 over the weekend. This positive momentum could be supported by an anticipated 50 basis point (bps) US interest rate cut by the US Federal Reserve (Fed) on Wednesday, according to CME Group data. At the same time, the announcement of Microstrategy’s plan to buy more BTC indicated further potential for Bicoin’s recovery in the coming days.

Daily Market Reasons: 69% Chance of 50bps Rate Cut

The Fed’s upcoming decision on Wednesday is likely to cause volatile price action for Bitcoin and global currencies. There is a 69 percent chance the Fed will cut interest rates by 50 bps on Wednesday for the first time in more than four years, according to CME Group data. This big rate cut could be a bullish sign for cryptocurrencies, stocks and global markets as lower borrowing costs generally provide more purchasing power for investors and they would invest their money in assets rather than to keep them in the banks.

“The Federal Reserve is widely expected to cut interest rates in September on Wednesday for the first time in four years. Investors will also take several cues from interest rate projections, known as “dot plots.” Expectations of aggressive rate cuts could continue to undermine the greenback in the near term,” said FXStreet analyst Lallalit Srijandorn.

Rate cut probability graph

On Monday, publicly traded US-based Microstrategy ( MSTR ) unveiled plans for a private offering of $700 million in convertible notes. The firm plans to raise capital to pay down debt and buy more Bitcoin.

“MicroStrategy acquired 18,300 BTC for ~$1.11B at ~$60,408 per #bitcoin and achieved a BTC return of 4.4% QTD and 17.0% YTD. As of 12/9/2024, we hold $244,800 BTC purchased for ~$9.45 billion at ~$38,585 per bitcoin,” said Microstrategy CEO Michael Saylor. Post on Twitter.

Now valued at $14.15 billion, the company’s Bitcoin portfolio has seen a 50% gain, driven by a combination of strategic fixed-interval purchases and rising Bitcoin prices.

Microstrategy’s focus on balancing debt reduction with Bitcoin accumulation continues to be central to its broader financial goals. Unlike exchange-traded funds (ETFs) like Blackrock’s IBIT and Grayscale’s GBTC, Microstrategy holds the most Bitcoin of any publicly traded company worldwide.

US Spot Exchange Traded Funds (ETF) data saw a light inflow of $12.80 million on Monday, following a net inflow of $403.30 million last week. However, this flow is small compared to the total Bitcoin reserves held by the 11 US spot Bitcoin ETFs, which total $49.44 billion in Assets Under Management (AUM).

Bitcoin Spot ETF net flow chart

Bitcoin ETF AUM chart

However, Coinglass data provides a light easy outlook for Bitcoin. Bitcoin’s long-short ratio is 0.99, indicating that several traders anticipate the asset’s price to fall. In any case, the ratio is very close to one, and a return above one would indicate that trader sentiment would change from bearish to bearish.

Bitcoin long-short ratio chart

Technical Analysis: BTC eyes for a recovery

Bitcoin price retested and failed to close above the downtrend line (drawn from multiple highs since late July) and the 100-day exponential moving average (EMA) at $60,705 on Friday. It fell by 3.78% in the next three days. At the time of writing on Tuesday, it is trading at just over $59,000.

If BTC continues to pull back, it could find support around the daily $56,022 level. If this support holds, BTC price could again attempt to break above the 100-day exponential moving average (EMA) at $60,685 and the downtrend line.

The Relative Strength Index (RSI) and the Awesome Oscillator (AO) on the daily chart are hovering around their neutral levels of 50 and zero, indicating that neither bulls nor bears are controlling the momentum. For the bullish move mentioned above to be sustained, both indicators need to trade above their neutral levels.

BTC/USDT Daily Chart

However, if BTC closes below the daily support level of $56,022, the bullish thesis will be invalidated. In this case, it could drop 3.6% to retest the psychologically important level at $54,000.