Bitfinex indicates significant potential for Bitcoin price fluctuations due to interest rate reductions.

Bitcoin (BTC) may experience notable price fluctuations this week as the Federal Reserve (Fed) is anticipated to reduce the US interest rate by at least 25 basis points (bps), as indicated in the latest “Bitfinex Alpha” report.

The extent of the movement hinges on whether the Fed opts for a 25 bps or a 50 bps reduction, as a smaller decrease could instigate “bullish optimism.” Conversely, a larger cut is likely to lead investors towards a “cautious de-risking” approach.

Analysts at Bitfinex pointed out that this volatility could be particularly pronounced in the inflows of spot Bitcoin exchange-traded funds (ETFs) and derivatives markets.

Additionally, rate reductions are frequently succeeded by a sell-off in equities and other risk assets in the short term, which contributes to a more cautious outlook among investors. However, the report emphasizes that while these historical trends offer insights, they are not infallible in predicting future actions.

Overall bullish indicators

Regarding price movements, Bitfinex analysts proposed that a local bottom at $52,756 may have been established after Bitcoin fell to that level on Sept. 6 and subsequently surged by over 15%.

This price recovery was accompanied by a week of positive inflows into U.S.-traded spot Bitcoin ETFs, which recorded $403.9 million in inflows after experiencing nearly $1 billion in outflows over the preceding two weeks.

Significantly, the resurgence of ETF inflows coincided with an increase in the S&P 500, indicating a rise in investor confidence in riskier assets despite the potential for volatility later this week.

Moreover, the report noted that the recent increases in Bitcoin prices have been fueled by spot market purchases rather than futures or perpetual trading. This is supported by the Spot Cumulative Volume Delta (CVD) data, which reflects consistent upward pressure since Bitcoin fell below $53,000 earlier this month.

Local challenge between $60,000 and $61,000

Introducing another layer of complexity to Bitcoin’s short-term price dynamics, Bitfinex warns that BTC is nearing the significant $60,500-$61,000 resistance level, which has been crucial since early March.

The report also observes that total Bitcoin Open Interest across perpetual trading pairs has increased by approximately 14% since the sub-$53,000 decline, aligning with the price movements.

If Bitcoin encounters resistance at the $61,000 level during a week expected to be highly volatile, the report concludes that traders and investors should brace for potentially swift and substantial price changes in the near future.

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