Bitcoin (BTC) price continues to struggle at $20,000 and repeated drops below this level have led some analysts to project a deeper drop in the short term. Earlier in the week, independent market analyst Philip Swift tweeted that the Crypto Fear and Greed Index had dropped consecutively to “Extreme Fear”, reflecting softer sentiment among investors.
The market is not enjoying USDBTC hanging around $20k. Back into Extreme Fear today.
Live chart: https://t.co/Jr5151zN7I pic.twitter.com/UnztrZP7FP
— Philip Swift (@PositiveCrypto) August 31, 2022
On Aug. 29, analytics firm Delphi Digital highlighted Bitcoin open interest hitting a new high, saying:
“The futures open interest leverage ratio for BTC reached its highest level ever recorded at over 3% of BTC market capitalization, following the collapse of the entire market on August 26.”
According to Delphi Digital, “higher values suggest that open interest is large, relative to the size of the market. This implies a higher risk of market contraction, liquidation cascades or delivery events.
Exactly what could catalyze such an event is unknown, but any continuation of the current downtrend in stocks that saw the Dow and S&P 500 wrap up a fourth day of decline to end August with losses could continue to weigh on Bitcoin price. CNBC data shows the Dow ended August down 4.1% and the S&P 500 and Nasdaq closed the month down 4.2% and 4.6%.
Cleveland Fed President Loretta Mester also commented that she expects the benchmark interest rate to rise above 4% and suggested cuts are highly unlikely for all of 2023. 4% is well above of the Fed’s target of 2.25%. to the 2.5% range.
Considering how the crypto markets have performed since the Fed began raising rates on July 26, 2022, and the fact that BTC and equity markets reflect a strong correlation, it would not be surprising to see a protracted decline in the price of Bitcoin for the next few months.
On the other hand, traders appear to remain optimistic about the upcoming merger. Ether and ETH staking-related tokens have held up relatively well since recovering from last week’s sell-off. After falling to $1,422 on August 28, Ether has gained 11.3% and is trading slightly below $1,600. Lido (LDO), the largest ETH staking service, is up 12% on the day and 32% since last week’s crash to $1.55.
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