An analytics firm specializing in cryptocurrency, Santiment, recently reported a sharp turn towards negativity in retail sentiment, reaching a low unseen since the beginning of April. This mirrors the situation in April, just prior to a Bitcoin bounce-back, indicating that the surge in bearish commentary could be a harbinger of a rebound. Concurrently, the Federal Reserve’s steady rates have left Bitcoin oscillating between $100K and $110K. Interestingly, on-chain data suggests that while traders are retreating, whales are in the accumulation phase.

Currently, the crypto market seems to be going through a slow correction phase. While Bitcoin has been trapped between $100K and $107K, altcoins have been on a downward trend since December. Ethereum too is wrestling to cross the $3,000 mark, and the overall decline in trading volume indicates that retail investors are temporarily opting out.

Despite all this, there have been no significant crashes or adverse events. This appears to be a standard cooling-off period within a broader uptrend, much akin to the events of 2017 and 2021. These phases often occur post major rallies and could continue for a few months.

Looking forward, a silver lining may be in sight. The Federal Reserve might cut rates in September – a scenario that CME FedWatch believes has a 71.8% probability. This could stimulate the crypto markets, and even the mere speculation of rate cuts could invigorate sentiment and breathe life into risk assets.

Raoul Pal, CEO of Real Vision, draws parallels between the current crypto market and that of 2017, when Bitcoin gradually grew before skyrocketing in December. He suggests that macro conditions hint at a longer-than-expected cycle, possibly extending into the second quarter of 2026.

Recently, a lot of long traders were eliminated on Binance as open interest declined. This “cleanup” took place immediately after the Federal Reserve put a pause on rate hikes. With fewer traders now in precarious positions, and historical trends suggesting that Bitcoin often rises after such events, this could be a setup for a Bitcoin bounce, according to CryptoQuant analysts.

However, James Wynn, a crypto trader, has expanded his $70M Bitcoin short position, warning of a significant market crash. He points to the escalating tensions between Iran and Israel, dwindling retail interest, and liquidity problems. Wynn believes that if the U.S. enters the conflict, it could provoke a global crisis. Nevertheless, he also holds the view that crypto will rebound post the drop.

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Barhydt stated, “I’ve viewed numerous posts presenting diverse renditions of the global liquidity M2 vs Bitcoin price chart – I’ve shared a few here. Kudos to @RaoulGMI and @BittelJulien for identifying this pattern.”

Most of these charts anticipate a slight decline in the next few days, followed by a surge to a record high of $130,000 by August or September. Barhydt, however, emphasized that these predictions could be entirely off the mark.

Barhydt opined that the global liquidity needs to increase significantly in the coming months. As the fiat supply grows, Bitcoin absorbs the surplus, leading to gains that will likely spill over to other L1 platforms and subsequently to speculative altcoins – the so-called ‘alt season’.

Despite this, he warned traders against complacency, suggesting that they should be prepared for a potential short-term downtrend to $95,000 before any substantial rally takes place.

When confronted with the concern that the model might be saturated, Barhydt dismissed the notion, stating, “Even though thousands might be examining this, the majority of retail investors aren’t focusing on crypto currently.”

Another critique suggested that the liquidity data is not collected frequently enough to predict daily movements. Barhydt agreed, but asserted that it serves as a solid tool for predicting macro trends on a weekly scale.

With the global M2 nearing a record $111 trillion, experts like Pal and Bittel believe Bitcoin is set to climb further. Whether Bitcoin will reach Barhydt’s $130,000 target or not will depend on the pace at which central banks increase their balance sheets and how traders leverage in the coming weeks.

As of now, Bitcoin is trading at $104,625.

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