Bitcoin (BTC), the world’s largest cryptocurrency, has rallied more than 22% in the past two weeks to trade around $63,200, following a significant drop to $52,000 on September 6. This is the level the highest BTC has reached in almost two months.
Critical Resistance to $65,200 Looms
According to the latest report from the digital asset trading platform Bitfinex, this price increase was mainly driven by the Federal Reserve’s (Fed) decision to reduce interest rates, which helped propel BTC to a high of $64,200 on September 20.
However, despite this positive aspect, Bitcoin is still below the critical resistance level of $65,200, which was established on 25 August. The report notes that the failure to break this level can confirm the worrying trend that has shown BTC price action since the peak of $73,666 in March.
Since that peak, Bitcoin has repeatedly struggled to break previous values ​​before making new lows, indicating a further decline. This pattern of highs and lows is visible on Bitcoin’s daily chart, suggesting that the cryptocurrency has been on a downward trend since mid-March.
As seen in the BTC/USDT daily chart above, this repeated price action is characterized by a continuous and sustained decline from the March high.
Nevertheless, continued volatility caused by macroeconomic fears caused another crash on August 5. BTC hit its lowest level in six months, falling to $49,000 from the $70,000 level it had been trading at since late July.
What’s Driving Bitcoin’s Recent Gains?
A significant concern experienced by Bitfinex is the mismatch between BTC price gains and open interest in futures markets. As BTC rose, open interest rose even faster, reaching $19.43 billion – from $18.93 billion on August 25- while the price of Bitcoin remained around $1,000 below the local high.
This variation suggests that much of the recent price movement may have been driven by speculative trading in futures and perpetual contracts rather than strong local market demand.
Earlier this month, Bitfinex noted that the rise of Bitcoin to about $ 62,000 was mainly due to the purchase of the local market, in sharp contrast to the current situation.
While this open interest trend may suggest rising speculative interest in Bitcoin, it does not directly indicate inflation. The report states that open interest is not a direct measure of market strength; it simply shows the total number of remaining contracts.
Finally, the report suggests that this renewed speculative interest rate could be beneficial as traders return from their summer vacation and reassess their positions after the rate cut. However, Bitfinex recognizes that without clear indications of continued bullish momentum, market participants should remain vigilant.
Featured image from DALL-E, chart from TradingView.com