bitcoin Faces Market Challenges Amid Rising Inflation and Weak Onchain Activity

Key Insights

• bitcoin (BTC) is currently trading within a descending channel, with weak onchain metrics indicating a lack of market momentum.
• Increasing core inflation rates (2.7%) and persistent price growth diminish the chances of Federal Reserve rate cuts, putting additional pressure on bitcoin and other risk assets.

bitcoin has seen significant price fluctuations at the beginning of the week, with sharp movements over the weekend and Monday resulting in a major shakeout in the derivatives market.

According to data from Glassnode, approximately $28.6 million in long positions and $25.2 million in short positions were liquidated within a single day. This unusual dual-sided liquidation caught many leveraged traders off guard and highlighted a swift change in market sentiment.

BTC-denominated open interest has decreased by around 7%, dropping from 360,000 to 334,000 BTC. This notable decline suggests a temporary clearing of speculative leverage, indicating that the market is undergoing a reset phase.

While bitcoin continues to hover in the $100,000–$110,000 range, its onchain activity appears to be cooling. Metrics indicating profitability are declining, and user engagement remains low, suggesting a consolidation phase. Glassnode observed that the market seems to be digesting recent gains, likely awaiting a renewed surge in demand to drive the next upward movement.

From a technical standpoint, bitcoin‘s inability to capture external liquidity near the $109,000 mark has resulted in a gradual decline on the 4-hour chart. Current price movements are confined within a descending channel, with a critical area of interest identified between $103,400 and $104,600. This range aligns with a daily fair value gap and is supported by the 200-day exponential moving average (EMA), increasing the likelihood of a potential bounce.

Given that bitcoin is gathering internal liquidity within this range, a bullish breakout above the descending channel to reach new highs remains a feasible scenario. However, without a significant increase in momentum and a revival of onchain activity, the broader market structure may remain in a consolidation phase.

bitcoin Confronts Challenges as Core Inflation Rises

The lack of bullish momentum could indicate that bearish trends may continue into the upcoming week. Despite recent optimistic discussions regarding a potential interest rate cut, the latest inflation figures suggest that the Federal Reserve has little incentive to alter its current approach.

The Personal Consumption Expenditures (PCE) inflation rate, which is the Fed’s preferred measure, has risen to 2.3%, aligning with expectations, while Core PCE has increased to 2.7%, slightly exceeding the anticipated 2.6%. This marks the first increase since February 2025, signaling renewed inflationary pressures.

With price growth exhibiting signs of persistence, the Federal Reserve is likely to maintain its current rate pause, keeping financial conditions tight, which is unfavorable for risk assets such as bitcoin.

Further supporting this cautious outlook, Glassnode data indicates a modest $7.7 billion rise in spot volume during the second quarter. Transfer volume saw a 36% decline earlier in the quarter, underscoring a lack of speculative urgency.

This article is intended for informational purposes only and does not constitute investment advice or recommendations. All investment and trading activities carry risks, and readers are encouraged to conduct their own research before making any decisions.

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research before making any investment decisions.