Inflation Concerns Propel Bitcoin's Bull Market Powered by Limited Supply

The U.S. Federal Reserve’s recent interest rate cut—the first since December 2024—has sparked renewed conversation around the possibility of a

supercycle. Some market experts believe this shift could propel prices as high as $500,000. By lowering the federal funds rate by 25 basis points to a target range of 4.00%-4.25%, the Fed cited declining job creation and a less optimistic economic forecast. Annual inflation stands at 2.9%, surpassing the Fed’s 2% objective. The move, which was largely expected, reflects a more accommodative approach that may boost liquidity in international financial markets.

Evidence of a cooling labor market has emerged, with the Bureau of Labor Statistics revising its figures to show 911,000 fewer jobs created between April 2024 and March 2025 than previously thought. This adjustment indicates the job market was weaker than earlier estimates, even prior to the latest policy shift. Fed Chair Jerome Powell stressed that future rate decisions will depend on economic data, leaving open the door for additional cuts based on upcoming reports.

At present, Bitcoin is trading close to $117,200, consolidating within a rising wedge formation on the 2-hour timeframe. Technical signals, including the 50-period SMA at $116,000 and the 200-period SMA at $113,800, continue to support a bullish setup. On-chain metrics reveal robust buying interest, evidenced by rejection wicks on pullbacks and the RSI holding steady at 59. Should Bitcoin climb above $117,600, the next targets could be $118,500 and higher; however, a dip below $116,000 may trigger further selling toward $114,400 and $113,200. Analysts are maintaining a cautious long stance, emphasizing the importance of sustained momentum above key support.

Looking further ahead, optimism around Bitcoin remains strong, driven by prospects of increasing institutional involvement and favorable macroeconomic trends. The launch of spot Bitcoin ETFs, such as BlackRock’s iShares IBIT, has attracted more than $17 billion in investments. These products have improved Bitcoin’s liquidity and accessibility, helping to bridge traditional finance with cryptocurrency. With assets in Bitcoin ETFs now exceeding $153 billion, institutional confidence in the sector continues to grow.

Improvements in Bitcoin’s underlying technology are also noteworthy. The Lightning Network now enables quicker and less expensive transactions, enhancing Bitcoin’s practicality for both savings and daily use. Additionally, tightened supply conditions—thanks to greater off-exchange holdings and declining issuance following past halvings—are adding a scarcity factor that may bolster prices in the near future.

The current bull run is further supported by a broader macro backdrop. Persistent inflation and expectations of further rate cuts by central banks are making Bitcoin’s limited, decentralized nature more appealing to investors. Founders of LondonCryptoClub have pointed out Bitcoin’s attractiveness as a hedge against inflation and U.S. dollar depreciation. Nonetheless, regulatory ambiguity and possible macroeconomic shocks still pose significant risks to the bullish narrative.

Network fundamentals have also played a role in Bitcoin’s recent gains. The hash rate has climbed to a record 1.12 billion TH/s, and network difficulty is expected to reach 136.04T by September 18, 2025. Miners have shifted toward accumulating coins, with reserves rising to a 50-day high of 1.808 million BTC. This behavior may reflect a more strategic approach ahead of the next scheduled halving in April 2024.

In summary, the Fed’s latest rate reduction has added further momentum to Bitcoin’s upward trend, with both analysts and traders monitoring critical resistance levels closely. A decisive move above $117,600 could signal the onset of a more substantial rally toward $500,000, though the need for caution remains due to possible short-term swings and regulatory challenges. The convergence of institutional interest, supportive macro trends, and tightening supply could pave the way for a supercycle, but ongoing vigilance regarding economic indicators and market sentiment will be vital for investors navigating these evolving conditions.