BTC is currently trading close to the lower end of its 76-day range. But analysts believe that upcoming Fed moves. And record-high open interest will enhance the likelihood of next “deleveraging events.” Bitcoin (BTC) is still trading around $20,000, per coin. And subsequent drops below this mark have prompted some analysts to forecast a deeper decline in the near future.
Independent market analyst Philip Swift tweeted that the Crypto Fear & Greed Index has plummeted back-to-back to “Extreme Fear”. Signaling a calming investor attitude.
On August 29, analytics firm Delphi Digital noted that Bitcoin open interest had reached a new high and stated:
“The Futures Open Interest Leverage ratio for BTC reached its highest level ever recorded at more than 3% of BTC market cap, following the market-wide collapse on August 26th.”
As per Delphi Digital, “higher values suggest that open interest is large, relative to market size. This implies a higher risk of market squeezes, liquidation cascades or delivering events.”
Uncertainty surrounds the potential catalyst for such an event. Although the price of Bitcoin might be affected by any extension of the current stock market fall. Which further saw the Dow and S&P 500 close out August with losses after wrapping up their fourth day of decrease.
According to CNBC data, the Dow ended August down 4.1%. While the S&P 500 and Nasdaq also lost 4.2% and 4.6%.
Loretta Mester, president of the Cleveland Federal Reserve, said that she anticipates an increase in the benchmark interest rate beyond 4%. And that it is highly improbable. That there will be any reductions in rates throughout the entire year 2023. The Fed’s target range of 2.25% to 2.5% is significantly above 4%.
Given the performance of the crypto markets since the Fed started hiking rates on July 26, 2022. And the fact that the BTC and equity markets exhibit a high degree of connection. It wouldn’t be unexpected to witness a prolonged decrease in the price of Bitcoin over the coming months.
BTC 200 week moving average drops below
This week’s price slide has taken BTC below its 200-week moving average (200WMA). A metric that has regularly provided insight into what stage of the market cycle the leading coin is in.
Much to the dismay of the crypto enthusuasts, BTC has traded below the 200 WMA for almost two months.
According to Arcane Research, “We haven’t seen this before, and it can look like the important indicator has been flipped to resistance. This is undoubtedly a bearish technical signal,”
On the other hand, traders still seem optimistic about the impending Merge. Since recovering from last week’s sell-off, Ether (ETH). And ETH staking-related coins have held up very nicely.
Ether has increased 11.3% since reaching a low of $1,422 on August 28. And now trades just under $1,600. The biggest ETH staking service, Lido (LDO), is up 12% today. And 32% from last week’s decline to $1.55.