Bitcoin holds $107K as Stagflation and Fed rate cuts loom

Takeaways:

• Bitcoin struggled to stay above $107,000 this week, yet exchange flows remain historically low as investors opt to keep their money on the sidelines.

• As US economic growth slows down, stagflation is a serious risk. However, Fed rate reductions could help to fix this situation and boost the Bitcoin price.

• The data from Onchain shows that Bitcoiners have been accumulating. Therefore, the next break-out will take place in the fall of 2025.

Bitcoin is now trading above $99,000 after briefly falling below that level. reclaimed Hopes of an impending breakout are fueled by the $107,000. Something is wrong. It’s not FOMO or a retail investor rush to buy. There is a calm, but uneasy, rally led by whales and traders while the onchain looks subdued.

It doesn’t seem like your typical bull run. Under the surface the US economy shows warning signs. However, the Fed has to choose between fighting inflation or supporting an economy that is weakening.

Bitcoin may thrive under such circumstances as a hedge to uncertainty. But can a market built on balance sheets—not belief—really break to new highs? Answers to stagflation may be coming this fall as the whispers of stagflation become louder.

Should the US prepare for stagflation?

The word “stagflation” Jerome Powell didn’t mention this in his semi-annual congressional report, but the issue dominated Powell’s remarks. The Federal Reserve Chair reiterated the fact that the bank’s primary objective is to maintain price stability. “well positioned to wait” More data is needed to confirm whether the tariffs imposed by President Donald Trump will lead to a surge in inflation. Meanwhile, fresh data signals slowing growth, rising unemployment, and stubborn inflation —the textbook definition of a stagflationary environment.

Fed officials reduced their forecast for GDP to only 1.4% in 2025 on June 17. This was down from 1.7% back in March. Forecasts for inflation rose from the prior 2.7% to 3%. Unemployment is expected to reach 4.5% from its previous 4.4%.

The trend is confirmed by data from the private sector. The Monday S&P Global PMI Flash reading dropped to 52.8% in June, from 53.0% in May. This shows a fading of momentum. The exports have fallen, the inventory stocks are increasing, all due to tariff worries, and consumers demand is shaky. 

On Thursday, US Bureau of Economic Analysis revised Real GDP in Q1 dropped from -0.3% down to -0.5%. This confirms the fragility of the US economy. The personal consumption growth fell to 0.5%, the weakest level since 2020. Meanwhile, core inflation increased to 3.8%.

But the trade war has not ended. The Kobeissi Letter’s analysts have stated warnThe 90-day tariff suspension by President Donald Trump has now been reduced to 12 days. This means that, without any new trade deals, the US will implement country-specific ‘reciprocal tariffs’ on July 9, including tariffs of up to 50% on EU imports, while maintaining a global 10% baseline tariff. 

As a result of the bilateral agreement signed on May 14, trade relations with China are on hold for 90 days. A separate deadline has been set at August 12, 2012. The framework for rare earth metals today and the relaxation of technology restrictions have set the stage, but a deal between world’s largest economies has yet to be reached.

Inflationary expectations may rise as soon as the Israeli/Iran war recedes from the news. This macro-background is largely bullish for Bitcoin and other assets. But this bull is lacking a critical piece.

What is a bull market without investors?

Bitcoin metrics show that market sentiment is not as strong as it usually is during bull markets. According to CryptoQuantBinance has seen its average Bitcoin flows plummet to 5700 BTC a month. This is lower than what was recorded in the Bear Market of 2022. In bull markets the exchanges receive more funds as participants try to catch up with momentum. It’s quiet.

There is plenty of cash available to purchase the dip. Glassnode report This money is concentrated in the hands of sophisticated traders, institutional desks and hedge funds. It does not appear to be a large amount for retail investors. The Bitcoin transaction count is declining and the size of transactions are increasing. As a result, traders have shifted their trading offchain. Permanent swaps dominate.

Bitcoin Vector, the Willy Woo/Swissblock joint project, is summarized as follows: 

“The tide is turning in favor of the bulls, but onchain strength is the missing piece. Without a recovery in Fundamentals and key components (Liquidity + Network Growth), the upside remains speculative, driven by leverage, not conviction. Bulls need more than just structure control to sustain this move.”

It is a question of vital importance. Can a bull market driven primarily by institutional investors—and not retail enthusiasm—sustain itself? 

The summer lull—or the calm before the storm?

While offchain speculation thrives, long-term investors are silently accumulating. Axel Adler Jr. points out that long-term holders are once more accumulating, like they did in previous rallies between $28,000 and $60,000. Adler Jr. stated. 

“Today, at the $100K mark, we again see sustained growth in the LTH/STH ratio: this accumulation phase could last 4-8 weeks, after which, by analogy with previous cycles, a powerful upward reversal is likely.”

According to an analyst, if historical trends hold true, Bitcoin could reach a new high of $160,000 in the near future.

Seasonality Support this timing. Bitcoin has historically performed worse in the summer. In the last decade, data shows that Bitcoin’s annualized average return between May 21-Sept. 25 is only +15% compared to +138% for the rest of year. More recently, summer has often been outright bearish, with an average seasonal drawdown of –17.6% since 2017.

This history implies that the coming months may be less about fireworks and more about consolidation—an accumulation phase where supply quietly tightens beneath the surface.

Related: US home mortgage regulator considers Bitcoin amid housing crisis

If the economic data continues to deteriorate—especially jobless claims and the Fed’s favored Core PCE inflation reading expected on Friday and Saturday—the Fed could indeed cut rates in September and October. The Fed would ease rates just as Bitcoin leaves its seasonal decline and long-term shareholders accumulate enough. 

Glassnode put it, “Structure remains supportive, but a breakout to new highs will likely require a clear pickup in demand, activity, and conviction.” This conviction will come to pass in due course, depending on the Fed’s actions and whether Bitcoin is able to again grab the attention of the general public.

This article contains no investment recommendations or advice. Risk is inherent in every investment decision and trade. The reader should always do research prior to making a final decision.