Bitcoin (BTC), the world’s largest cryptocurrency, has risen more than 22% in the past two weeks to trade around $63,200, after dropping significantly to $52,000 on September 6. This is the highest level BTC has reached in almost two months.
Critical resistance at $65,200 looms
According to a recent report from digital asset trading platform Bitfinex, this price increase was largely driven by the Federal Reserve’s (Fed) decision to cut interest rates, which helped BTC to a new local high of $64,200 on September 20.
However, despite this positive momentum, Bitcoin is still just below the critical resistance level of $65,200 set on August 25. The report notes that failure to breach this level could confirm a worrying trend that has characterized BTC’s price action since its all-time high of $73,666 in March.
Since that peak, Bitcoin has repeatedly struggled to break previous highs before forming new local lows, indicating a continued downward trend. This pattern of lower and lower highs is clearly visible on the daily Bitcoin chart, indicating that the cryptocurrency has been on a downward trajectory since mid-March.
As seen on the daily BTC/USDT chart above, this repeated price action has been marked by a sustained and ongoing downtrend since the March peak.
Nevertheless, further volatility fueled by macroeconomic fears caused another crash on August 5. BTC hit its lowest level in six months, reaching the $49,000 level, compared to the $70,000 level it has been trading at since late July.
What has caused Bitcoin’s recent gains?
One notable concern that Bitfinex notes is the discrepancy between BTC price gains and open interest in future markets. As BTC rose, open interest rose even faster, reaching $19.43 billion – up from $18.93 billion on August 25 – while Bitcoin prices remained around $1,000 below the local high.
This divergence suggests that much of the recent price movement may be driven by speculative trading in futures and perpetual contracts rather than strong demand in the spot market.
Earlier this month, Bitfinex noted that Bitcoin’s rise to around $62,000 was largely fueled by robust spot market buying, in stark contrast to the current situation.
While this trend in open interest could indicate increased speculative interest in Bitcoin, it does not directly imply bearishness. The report states that open interest is not a definitive measure of market leverage; it merely reflects the total value of outstanding contracts.
Finally, the report suggests that this renewed speculative interest could be beneficial as traders return from their summer vacation and reassess their positions following the rate cut. However, Bitfinex notes that in the absence of clearer indicators of continued bullish momentum, market participants should remain cautious.
Featured image of DALL-E, chart from TradingView.com
Credit : www.newsbtc.com
