BTC is trading at the bottom of its 76-day range, but analysts say future Fed action and record-high open interest are increasing the likelihood of future “debt” events.
Bitcoin (BTC) price continues to struggle around the $20,000 level and repeated declines below this level have led some analysts to predict a deeper drop in the short-term. Earlier this week, independent market analyst Philip Swift tweeted that the Crypto Fear & Greed Index fell to “Extreme Fear,” reflecting softening investor sentiment.
On Aug. 29, analytics firm Delphi Digital noted that open interest in Bitcoin had reached a new all-time high, stating:
“Futures open interest leverage for BTC reached over 3% of BTC’s market cap, the highest since the general market crash on August 26.”
According to Delphi Digital, “Higher scores indicate that open interest is large relative to market size. This implies a higher risk of market compressions, liquidation cascades or event realizations.”
Bitcoin Open Interest. Source: Delphi Digital
Exactly what could trigger such an event remains unknown, but any continuation of the current downtrend in stocks, which has seen the Dow and S&P 500 end their fourth day of decline through late August, could put further pressure on the Bitcoin price . CNBC data shows that the Dow ended August down 4.1%, while the S&P 500 and Nasdaq ended the month down 4.2% and 4.6%, respectively.
Cleveland Federal Reserve Chair Loretta Mester also commented that she expects the benchmark interest rate to rise above 4%, noting that cuts are unlikely to happen later in 2023. 4% is well above the Fed’s target of 2.25%. range up to 2.5%.
Considering how the crypto markets have behaved since the Fed started its first rate hike on July 26th, 2022, and the fact that the BTC and stock markets reflect a strong correlation, it is not surprising that the price of Bitcoin is over goes back a longer period of time. in the following months.
Related: A potential double bottom in bitcoin price could spark BTC rally to $30,000 despite ‘extreme fear’
On the other hand, traders seem to remain bullish on the upcoming merger. Ether (ETH) and ETH-staking-related tokens are holding up relatively well after recovering from last week’s sell-off. After falling to $1,422 on Aug. 28, Ether is up 11.3% and is trading just below $1,600. Lido (LDO), ETH’s largest staking service, is up 12% on the day and is up 32% since last week’s drop to $1.5.