Retail activity cools off as institutions maintain positive flows, supporting BTC above $100,000.
Bitcoin price struggled to maintain bullish momentum this week as the weight of political economic factors. Moreover, the market also eagerly anticipated the Federal Reserve’s decision on interest rates.
The same factors resulted in Bitcoin price briefly sliding below $104,000 on Tuesday and Wednesday. There was risk of further decline especially if an unexpected interest rate hike was announced.
Fortunately for the markets, FED chair Jerome Powell announced that rates would remain unchanged at 4.50%. Bitcoin price bounced back slightly after the FED’s interest rate announcement.
The announcement eased some of the sell pressure that the cryptocurrency had been experiencing earlier this week. BTC price action approached $105,000 at the time of observation.
However, it was worth noting that the RSI dipped below its 50% level courtesy of the recent wave of uncertainty. This warranted an assessment of Bitcoin’s prevailing demand levels.
Bitcoin fear and greed sentiment achieved a slight recovery in in the last 24 hours. It bounced from 52 (neutral) on Wednesday to 57 (greed) on Thursday morning, which was reflection of the confidence boost from the FED.
However, exchange reserves showed signs of leveling out as exchange flows cooled down further. Historically, an interest rate decision is usually accompanied by a spike in activity as the market regains confidence. However, exchange flow data painted a different picture.
Exchange inflows were still slightly higher than exchange outflows at the time of observation. This confirmed that demand was still weak, and it explained why a sharp recovery had not yet taken place.
The main explanation for this outcome was likely the fact that geopolitical tensions in the Middle-East were still influencing investor sentiment.
These observations were consistent with a recent CryptoQuant analysis which pinpointed growing divergence between open interest on Binance, and Bitcoin price.
According to the analysis, open interest on Binance has been declining, which may reflect the weak demand in the market. This combined with the declining appetite for leverage confirmed that directional uncertainty was on the rise.
Both open interest and estimated leverage ratio cooled down considerably in the last 10 days. This was clear evidence that derivatives demand had responded negatively to recent market factors. That kind of market reaction is to be expected during times of higher uncertainty.
While the recent decision to keep rates may have kept the bears at bay, the rising economic pressures could still have an impact on BTC down the road.
If the FED raises rates sometimes soon, then investor sentiment may deteriorate further and this could lead to intensified sell pressure.
However, the latest FOMC data revealed that at least 7 participants expected that there would be no rate cuts for the remainder of 2025.
However, 8 participants expect at least 2 rate cuts while 2 participants anticipate at least 3 rate cuts.
None of the participants were convinced that the FED might raise rates. Nevertheless, the lack of a rate cut so far is expected to delay liquidity injection into altcoins. That may not be the same case for Bitcoin.
It turns out that ETFs have been propping up Bitcoin price action, or rather shielding it from more decline. BTC ETFs have so far maintained positive flows since 9 September.
Bitcoin exchange inflows on Wednesday amounted to $388.3 million. BlackRock accounted for the lion’s share of the inflows.
Bitcoin spot flow data on Coinglass revealed that outflows were dominant since 9 June. However, recent data revealed that spot outflows were cooling down, which signaled potential for the bulls to take over at its short term support near the $104,000.
Whale activity also demonstrated weak sell pressure which was a sign of long term optimism. Yet another factor explaining why Bitcoin has so far managed to stick its neck above $100,000.
However, the risk of bearish capitulation was still high especially if spot demand fails to follow through towards the weekend.
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