Key Points
Bitcoin’s price has been declining, but four factors suggest a potential rebound.
These factors include rising futures open interest, spot Bitcoin ETF inflows, increasing active Bitcoin addresses, and potential Federal Reserve cuts.
Bitcoin’s value has been on a downward trend for two successive days, causing a halt in the recent momentum witnessed in the cryptocurrency and stock market. On Sunday, Aug. 26, Bitcoin (BTC) fell from a high of $64,960 to $62,300. However, there are four key indicators that suggest Bitcoin might rebound and retest the crucial resistance point at $68,000.
Rising Futures Open Interest
Data from third parties indicate a resurgence in demand for Bitcoin in the futures market. Statistics from SoSoValue illustrate that interest surged to $34.7 billion on Aug. 26, marking its highest point since Aug. 2 and significantly surpassing the month’s low of $26.65 billion. This figure has been on the rise for three straight days. Futures open interest represents the number of unsettled contracts, and a high figure signifies increased market participation, indicating heightened demand.
Spot Bitcoin ETF Inflows
Further signs of Bitcoin demand come from the exchange-traded funds (ETFs) market. Data reveals that most ETFs recorded inflows on Monday, Aug. 26, for the eighth day in a row. Total inflows escalated to over $202 million, a rise from Friday’s $252 million. Last week, these funds added $506 million, following a gain of $32 million the previous week, and this trend looks set to continue. In total, spot Bitcoin ETFs have experienced over $18 billion in inflows, with the iShares Bitcoin Trust being the most active. Recent filings by hedge funds reveal that firms such as Millennium Management, Citadel, Schonfeld, and Susquehanna have invested in Bitcoin ETFs. Major Wall Street banks such as Goldman Sachs and Morgan Stanley have also invested in these ETFs.
Increasing Active Bitcoin Addresses
On-chain data indicates a rise in the number of active Bitcoin addresses. SoSoValue reports that active Bitcoin addresses increased to 671,000 on Aug. 6, up from 538,000 on Sunday. This number is approaching the month-to-date high of 725,000. Additional data shows a rise in new addresses in Bitcoin’s network, with new addresses increasing to 264,000 on Monday from 253,000 a day earlier. These statistics suggest a continued demand for Bitcoin within the cryptocurrency community.
Potential Federal Reserve Cuts
Bitcoin may also benefit from interest rate cuts, as has been the case in the past. Jerome Powell, in a statement on Friday, hinted that the bank is likely to commence rate cuts in September. The extent of the cut will be dependent on the forthcoming personal consumption expenditure and non-farm payroll data. A weak jobs report will increase the chances of a significant 0.50% cut. Bitcoin has historically performed well when the Fed cuts rates, such as in 2020 when the Fed intervened due to the COVID-19 pandemic, and in 2017 when the Fed reduced rates. However, Bitcoin’s performance reversed in 2018 and 2022 when rates were increased. The Fed raised rates four times in 2028 and six times in 2022 due to rising inflation.
Moreover, $68,000 is a significant level since it aligns with the series of lower highs that Bitcoin has been forming since March. The first one was at $73,800, followed by $72,000 in June, and $70,000 in July. A break above $68,000 will likely indicate a bullish breakout.
