Bitcoin Open Interest Swells by $2 Billion in Anticipation of Likely Fed Rate Cut
Most analyst expect Federal Reserve Chairman Jerome Powell to announce a rate cut in September. Photo by Andrew Harnik/Getty Images.
Key Takeaways
- Open interest in Bitcoin futures and options has increased by 5.53% in the past 24 hours.
- The rise came after the Federal Reserve published the minutes of its July rate-setting meeting.
- Analysts widely expect the Fed to cut interest rates in September.
On Wednesday, Aug. 21, the US Federal Reserve released the minutes of a July meeting that observers have read as the strongest signal yet of an impending interest rate cut in September.
Since then, the open interest in Bitcoin positions tracked by CoinGlass has increased by 5.53% to over $32.34 billion.
Traders Respond to Anticipated Rate Cut
Although the Federal Open Market Committee (FOMC) that sets interest rates decided to keep them steady in July to avoid the risk of inflation
However, the minutes suggest a rate cut is likely when the FOMC next convenes in September. “Almost all participants observed that the factors that had contributed to recent disinflation would likely continue to put downward pressure on inflation in coming months,” they state.
With analysts widely anticipating a rate cut, financial markets responded positively. Wall Street’s main indices closed slightly higher on Wednesday, and futures markets continued to creep up throughout Thursday.
In the Bitcoin market, where futures account for the vast majority of derivatives trades, open interest in futures contracts has risen to $31.9 billion, its highest level since Aug. 4.
At the time of writing, the 24-hour long/short ratio stood at 0.9444, with slightly more traders betting on the price of BTC declining.
Implications for BTC Price
Open interest is a metric that traders and analysts use to assess market sentiment and anticipate future price movements in cryptocurrencies.
For example, if prices and open interest both rise, it can signal an influx of new capital entering the market, preempting further price gains.
Conversely, if open interest declines while prices are rising, it can be a bearish signal, indicating that money is leaving the market.
With Bitcoin up 3% in the past 24 hours, the spike in open interest is a strong sign that the price could rise further in the near term.
Since the beginning of August, BTC has been stuck in the $57,000- $61,00 range. In the past day, it has broken through the $61,000 ceiling several times but has struggled to hold ground.
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