What to Watch After the FOMC Meeting?

Currently, the market is supported not by new buyers, but by existing holders choosing not to sell.

Written by: Blockchain Knight

In the early hours, the Federal Reserve announced the results of the July FOMC meeting, deciding to keep the federal funds rate unchanged in the range of 3.5%-3.75%, in line with market expectations.

More noteworthy than the rate decision itself is the Fed's communication style. The statement from this meeting was largely similar to the last one, with only changes in the voting ratios and dissenting committee members, and no new policy signals were released, continuing the trend of less forward guidance and fewer directives since Waller took office.

While this approach increases policy flexibility, it also makes it more difficult for the market to judge the future path of interest rates. Before the meeting, some analysts had bet on a possible rate hike in July, but this did not occur, thus alleviating the market's short-term policy risk.

For Bitcoin, this FOMC meeting did not provide any significant directional stimulus. The Fed's inaction means that the liquidity environment has not tightened further, which is a neutral outcome for risk assets, but it also did not release any signals for rate cuts or easing, making it unlikely to act as a catalyst for Bitcoin's resurgence.

Currently, the core contradiction in the market has shifted from macro policy back to the funding situation. Whether Bitcoin can break out of its fluctuations depends more on whether new funds return.

The U.S. spot Bitcoin ETF has seen net outflows for five consecutive trading days, with a total outflow exceeding $500 million.

ETFs have been one of the most important sources of incremental funds in this round of market activity. Continuous outflows indicate that some institutional funds are beginning to reduce short-term risk exposure, but this reflects more of a position adjustment and does not mean that institutions are bearish on Bitcoin.

Glassnode data shows that the funding rate for perpetual contracts continues to decline, with a noticeable decrease in the willingness of bulls to chase higher prices. Although the open interest has not significantly decreased, market leverage sentiment is cooling, and investors are becoming more cautious.

At the same time, on-chain inflows of new funds have stagnated. Active addresses remain stable, but trading activity and fund inflows have not improved significantly, indicating that off-market funds are still maintaining a wait-and-see attitude.

In the absence of new buying, Bitcoin is currently able to hold around $64,000 mainly due to support from long-term holders.

Glassnode's weekly report suggests that long-term holders still maintain strong confidence in holding their coins, with realized losses not significantly widening and no large-scale sell-offs occurring. This is also a key reason why Bitcoin has not further broken below critical support.

In other words, the market is currently supported not by new buying, but by existing holders choosing not to sell.

For Bitcoin, the short-term impact is more about eliminating the uncertainty brought by interest rate hike expectations. If ETF funds can resume net inflows, coupled with the fact that there will be no more FOMC meetings until mid-September, Bitcoin is expected to rebuild upward momentum.

Of course, attention should still be paid to the Jackson Hole conference at the end of August, where Waller will speak. In previous years, this has somewhat impacted the market, but if Waller continues his current style, this year may be different, likely turning into a repetition of “old clichés.”

Notably, the recent inflows into ETH ETFs have shown some positive energy. Is this a sign of institutions rebalancing their portfolios?