The Federal Reserve's "Quiet Period" Undercurrents: On-Chain Data Reveals Subtle Market Unease

Original Title: "The Fed Holds Steady, Markets Remain Calm, But On-Chain Data Reveals Unusual Signals"

Source: Bitpush

On Wednesday afternoon local time (June 18), the United States Federal Reserve (the Fed) announced that it would keep the benchmark interest rate unchanged at 4.25%-4.50%. This marks the fourth consecutive meeting where the Fed has taken a "wait-and-see" approach, fully aligning with market expectations.

In its statement, the Fed noted that while uncertainties surrounding the economic outlook have lessened, they remain elevated. Additionally, the Fed revised its forecast for U.S. GDP growth in 2025 downward to 1.4% but raised its inflation expectation to 3%. This highlights the Fed's ongoing dilemma between supporting economic recovery and controlling inflation.

Expectations for rate cuts were also adjusted: The Fed's "dot plot" indicates that while two rate cuts (a total of 50 basis points) are still expected in 2025, consistent with March's projections, the expectation for rate cuts in 2026 has been reduced from two to one (just 25 basis points). Moreover, it’s worth noting that among the 19 Fed officials, seven believe there will not be any rate cuts in 2025, signaling considerable internal disagreement on the future policy path.

The Crypto Market: Calm Surface, Underlying Currents

Despite the Fed’s policy decisions having a significant impact on global financial markets, the cryptocurrency market reaction appeared rather "zen-like." Bitcoin (BTC) hovered around $104,000, Ethereum (ETH) remained steady at $2,520, and XRP and Solana also saw little change.

According to data from CoinGlass, while the total market capitalization of cryptocurrencies dipped slightly by 2% to $3.35 trillion on the day, liquidations reached a significant $224 million, with Ethereum witnessing the highest liquidation volume, followed by Bitcoin. This suggests that the tug-of-war between bulls and bears within the market remains intense.

Notably, U.S. spot Bitcoin ETFs recorded a net inflow of $216 million on June 17, while spot Ethereum ETFs saw an inflow of $11 million. This indicates that institutional capital continues to flow into the crypto market, providing support at the lower levels. Market experts believe this seemingly "calm" reaction reflects cautious sentiment among investors post-Fed decision, as they await clearer macroeconomic signals.

Trump Criticizes Powell Again: Politics Influencing Market Judgment

Interestingly, on the day of the Federal Reserve meeting, Trump once again publicly criticized Federal Reserve Chairman Jerome Powell, calling him "stupid" and predicting that the Fed would not cut rates that day. Trump has long criticized Powell, accusing his policies of "costing the country a lot of money." He argued that Europe has cut rates 10 times, whereas the U.S. has not done so even once, questioning Powell's political stance. While such political rhetoric has garnered attention, it has so far failed to exert a significant direct impact on the crypto market. Instead, the market appears more focused on the economic data itself.

Global Tensions Rise, Why Is the Crypto Market So Calm?

Ray Yossef, CEO of NoOnes, pointed out that despite escalating tensions in the Middle East and a turbulent macro environment over the past week, cryptocurrency prices have barely moved. He explained that Bitcoin has remained relatively stable around the $105,000 mark within a narrow range, with daily volatility below 2.1%, and no signs of mass panic selling.

Yossef also warned against ignoring rising macro risks. He emphasized, "If geopolitical tensions escalate or begin to impact the financial system through sanctions, infrastructure disruptions, or capital controls, the crypto market will not be immune." He noted that Bitcoin's market dominance has approached 66%, indicating a reduced appetite among investors for high-risk altcoins in the current environment.

On-Chain Data Reveals: Bitcoin Scarcity Is Strengthening

Beyond price movements and macroeconomic factors, on-chain data provides additional intriguing insights. According to data from institutional DeFi solutions provider Sentora (formerly IntoTheBlock), Bitcoin's Market Value to Realized Value Ratio (MVRV Ratio) currently sits below its historical market peaks. The MVRV Ratio measures the ratio of Bitcoin's total market capitalization to the total value of all Bitcoins based on their last movement on-chain (the "realized value"). This metric reflects whether the overall network's investors are in aggregate profit or loss.

Data shows that extreme peaks in Bitcoin's MVRV Ratio have historically aligned with asset price tops, as high MVRV values indicate that the average investor holds substantial profits and may be more inclined to take profits. However, Bitcoin's current MVRV Ratio stands at 2.25. While this indicates the market value is more than twice the realized value, the figure remains noticeably lower compared to previous cyclical peaks. This suggests the market is not yet overheated, leaving potential room for further Bitcoin price appreciation. A June 18 research report by Fidelity Digital Assets noted that the growth rate of Bitcoin's "Ancient Supply" is outpacing the issuance of new Bitcoins on a daily basis.

"Ancient Supply" refers to Bitcoin that has not been moved for at least ten years. Since April 2024, an average of 566 Bitcoins have entered the "over ten years dormant" queue daily, surpassing the 450 Bitcoins added to circulation by miners each day. This shift comes less than a year after the 2024 Bitcoin halving event, which cut block rewards in half and drastically altered Bitcoin's supply dynamics.

Currently, "Ancient Supply" accounts for over 17% of all mined Bitcoin, valued at approximately $360 billion. Although 33% of this supply is attributed to Satoshi Nakamoto's holdings, and some Bitcoins may be permanently lost, analysts note that any of these coins could re-enter circulation.

Fidelity's report also mentions the "HODL Ratio" (defined as Ancient Supply inflow minus new issuance). This metric turned positive in April 2024, reflecting an average daily increase of 116 Bitcoins, further confirming that core holders are absorbing Bitcoin from circulation at a faster pace than miners are producing it.

Fidelity predicts that, based on current trends, by 2035, "Ancient Supply" will comprise over 30% of the circulating Bitcoin supply. While such scarcity does not directly guarantee price increases (as demand is also required), the growing control of Bitcoin by long-term holders tightens the supply available for traders, increasingly making price discovery dependent on marginal flows.

The report concludes that Bitcoin has now differentiated itself from goods with elastic supply. Its scarcity, combined with long-term holding and lost coins, is expected to strengthen over time. If demand grows in parallel, this characteristic could redefine its value discovery mechanism, establishing it as a core advantage over other asset classes.

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