Bitfinex Alpha | Consolidation On The Cards For BTC Post Rate Cuts

Bitcoin has rallied since the Fed’s rate cut decision,  rising over 22 percent to reach a new local high of $64,200 on Friday, September 20th, marking its highest point since September 6th. Despite this strong move, BTC remains just shy of the critical August 25th top at $65,200. This is significant because, if BTC does not breach this level, it will confirm a pattern we have seen since the all-time high of $73,666 in March, with Bitcoin failing to  surpass any prior high before forming a new local bottom, maintaining a downtrend. In other words, zoom out, and BTC has been trending downwards since March. In addition, while near-term price gains have been positive, it is of some concern that BTC  open interest has outpaced the price gains of BTC itself, indicating that it is the futures and perpetual markets, rather than the spot market that may have been behind much of the move last week.

Meanwhile, we have seen some altcoins surging, with some notable coins posting more than 100 percent gains from their lows in August and September. However, similar caution is warranted here too, as altcoin OI has also reached a new high without the corresponding price breakout in the broader underlying altcoin market. The  OTHERS index (which measures the performance of alts excluding the top 10 coins by market cap) has continued to trend downwards in the last month.

With Bitcoin spot market buying slowing, evidenced by spot Cumulative Volume Delta flattening when the price reached $63,500, we foresee BTC moving in a range in the near-term.

All that being said, a significant counter-argument to this thesis is that sustained ETF inflows could buoy the BTC price. In the last week, renewed inflows were recorded into spot Bitcoin ETFs, with $397.2 million added. This suggests that further upside is possible, particularly if traditional finance markets like the S&P 500 continue to rally. Should Bitcoin breach the key resistance levels from late August, this could propel the asset towards new highs, coinciding with the end of summer’s low liquidity. However, without sustained spot buying, consolidation or a partial correction seems the most likely scenario.

In the broader economy,  the Fed’s decision to cut  interest rates by  50 basis points, is seen as the  first in a series of reductions, and reflects a shift in the central bank’s priorities from controlling inflation to focusing on  the labour market.

Indeed, inflation is showing signs of softening as indicated by August retail sales data, which grew by only  0.1 percent, and was concentrated only in a limited number of categories. As employment stabilises and grows, household spending is expected to follow, but uncertainties linger over whether the current trajectory of consumer demand can be maintained.

On the industrial front, the economy received a much-needed boost with a sharp rebound in industrial production in August. Similarly, the housing market experienced a boost in single-family home construction during August, signalling short-term optimism. Still, it remains unclear whether this momentum will be sustained. The Fed’s actions will be crucial in shaping how housing and broader markets adapt to these shifting conditions.

The cryptocurrency landscape continues to evolve rapidly, marked by significant institutional moves and regulatory crackdowns. In a major step for Bitcoin’s integration into traditional finance, the SEC has fast-tracked approval for BlackRock to list options for its iShares Bitcoin Trust  on Nasdaq ISE, and further ETF issuers have also filed applications to list options. 

Meanwhile, MicroStrategy has expanded its already significant Bitcoin holdings with the acquisition of 7,420 more BTC for $458.2 million, bringing its total to 252,220 BTC, worth $15.8 billion. 

As  these institutional advances are made, law enforcement efforts are also intensifying to remove bad actors. German authorities, including the Central Office for Combating Cybercrime and the Federal Criminal Police Office , have dismantled 47 exchange platforms allegedly used for large-scale money laundering.

Have a great trading week!

The post Bitfinex Alpha | Consolidation On The Cards For BTC Post Rate Cuts appeared first on Bitfinex blog.