Bitcoin (BTC), the world’s largest cryptocurrency, has surged more than 22% over the past two weeks to trade at around $63,200, after a sharp drop to $52,000 on September 6. That’s the highest level Bitcoin has reached in nearly two months.
Critical resistance looms at $65,200
According to a recent study a report From digital asset trading platform Bitfinex, this price surge was largely driven by the Federal Reserve’s decision to cut interest rates, which helped push BTC to a new local high of $64,200 on September 20.
However, despite this positive momentum, Bitcoin’s price remains just below the critical resistance level at $65,200, which was established on August 25. The report notes that failure to break this level could confirm a worrying trend that has characterized Bitcoin’s price action since its all-time high of $73,666 in March.
Since that peak, Bitcoin has repeatedly struggled to break its previous highs before making new local lows, indicating a continued downtrend. This pattern of higher lows and higher lows is evident on the daily chart of Bitcoin, indicating that the cryptocurrency has been on a downward trajectory since mid-March.
As shown in the daily chart of BTC/USDT above, this recurring price action has been marked by a sustained and persistent downtrend since the March peak.
However, further volatility fueled by macroeconomic concerns led to another collapse on August 5. Bitcoin hit a six-month low, falling to $49,000 from the $70,000 level it had been trading at since late July.
What’s driving Bitcoin’s recent gains?
One notable concern Bitfinex found was the discrepancy between BTC price gains and open interest in futures markets. As BTC rose, open interest rose even faster, to $19.43 billion — up from $18.93 billion on August 25 — while Bitcoin remained about $1,000 below its local high.
This divergence suggests that much of the recent price action 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 surge to around $62,000 was largely driven by strong buying in the spot market, in stark contrast to the current situation.
While this trend in open interest may indicate increased speculative interest in Bitcoin, it does not directly mean a price decline. The report notes that open interest is not a definitive measure of leverage in the market; 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 vacations and reassess their positions following the rate cut. However, Bitfinex notes that in the absence of clearer signs of sustained upward momentum, market participants should remain cautious.
Featured image by DALL-E, chart by TradingView.com