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Bitcoin (BTC) is nearing its August 25 peak of $65,200, a resistance level that may keep BTC in a consolidation phase for several weeks, as indicated in the latest “Bitfinex Alpha” report.
BTC has risen nearly 6% since the Federal Reserve reduced the US interest rate by 50 basis points. However, the report emphasized that the current surge in Bitcoin is mainly fueled by futures trading rather than spot market transactions, which raises concerns regarding possible volatility and corrections.
Derivatives-driven surge
Global open interest (OI) in Bitcoin futures has climbed to $19.43 billion, exceeding the August 25 figure of $18.93 billion, while the price remains approximately $1,000 below the recent high. This indicates that the ongoing price movement is primarily influenced by perpetuals and futures trading, in contrast to the spot market-driven rally observed earlier this month.
Moreover, buying activity in the spot market has decelerated as the spot cumulative delta indicator has leveled off above $63,500. This trend, along with heightened futures activity, implies the possibility of a new lower timeframe range or a partial correction.
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While this may be interpreted as a bearish indicator, Bitfinex analysts noted that OI does not reflect the extent of leverage being utilized by derivatives traders. The elevated OI is likely a result of renewed investor interest in speculating on risk assets like Bitcoin following the rate cut.
Additionally, speculation in altcoins is also increasing, with certain tokens such as SUI and AAVE experiencing 100% gains since their lows in August and September. However, altcoin open interest has also reached a new high of $11.48 billion compared to the August 19 peak of $10.74 billion.
ETF inflows indicate otherwise
An opposing viewpoint to the potential for consolidation is the resurgence of interest in spot Bitcoin exchange-traded funds (ETFs), which recorded $397.2 million in net inflows last week after experiencing outflows from August 24 to September 6.
The future trajectory of the crypto market may be shaped by broader market dynamics, especially if the S&P 500 continues to rise beyond its all-time highs, with Bitcoin potentially following this trend.
The report noted that the risk appetite for Bitcoin from traditional finance has been reflected in spot ETF inflows, which have historically shown a strong correlation between Bitcoin and the S&P 500.
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