Bitcoin Surges 22% After Fed Rate Cut: Will It Break Through Resistance? – Bitfinex Insights
Bitcoin Climbs 22% Following Fed Rate Cut, But Key Resistance Remains
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Bitcoin (BTC), the leading cryptocurrency, has rallied over 22% in the past two weeks, trading at around $63,200 after a significant dip to $52,000 on September 6th. This marks BTC’s highest level in nearly two months.
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Critical Resistance At $65,200 Looms
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According to a recent report from digital asset trading platform Bitfinex, this price surge was largely fueled by the Federal Reserve’s (Fed) decision to cut interest rates, propelling BTC to a new local high of $64,200 on September 20th. However, despite this positive momentum, Bitcoin is still hovering below a critical resistance level of $65,200, established on August 25th.
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The report highlights that failing 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 through previous highs before forming new local lows, indicating a persistent downtrend.
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This pattern of lower and lower highs is evident on the daily Bitcoin chart, suggesting 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 characterized by a sustained and continuous downtrend since the March peak.
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Nonetheless, further volatility driven by macroeconomic fears triggered another crash on August 5th. BTC hit its lowest level in six months, plummeting to the $49,000 level from the $70,000 level it had been trading at since late July.
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What Fueled Bitcoin’s Recent Gains?
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One notable concern that Bitfinex points out is the discrepancy between BTC’s price gains and open interest in futures markets. As BTC rose, open interest rose even faster, reaching $19.43 billion – up from $18.93 billion on August 25th – while the Bitcoin price remained around $1,000 below its local high.
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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 observed that Bitcoin’s rise to around $62,000 was largely fueled by robust spot market buying, in stark contrast to the current situation.
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While this trend in open interest might suggest increased speculative interest in Bitcoin, it does not directly imply bearishness. The report states that open interest is not a definitive measure of leverage in the market; it merely reflects the total value of outstanding contracts.
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Finally, the report suggests that this renewed speculative interest could be beneficial as traders return from their summer holidays and reassess their positions following the rate cut. However, Bitfinex does note that in the absence of clearer indicators of sustained bullish momentum, market participants should remain cautious.
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Featured image from DALL-E, chart from TradingView.com