Bitcoin's Recent Rally: A Sustainable Surge?

Bitfinex published a report on September 16th, stating that Bitcoin's recent surge, gaining over 15% from its recent low of $52,756, has been fueled by a notable increase in Bitcoin ETF inflows. The past week saw a net inflow of $4.039 billion into Bitcoin ETFs, marking a reversal of the long-term outflow trend and indicating renewed investor confidence in the asset. This rebound is primarily attributed to positive buying in the spot market. In contrast, the futures and perpetual contract markets have exhibited less volatility, suggesting that the current price rise is largely based on genuine capital inflows rather than speculative leverage, providing a more sustainable foundation for this rally.

However, Bitcoin currently faces a crucial resistance level between $60,500 and $61,000, which has played a pivotal role since early March. While ETF inflows remain strong, there are signs of potential market stagnation as spot CVD (buy-sell order imbalance) has flattened over the weekend. Market volatility is likely to be heightened this week, primarily driven by investor expectations regarding the Federal Reserve's decision. Regardless of whether the rate cut is 25 basis points or 50 basis points, it could influence market sentiment. Simultaneously, Bitcoin's correlation with the US stock market is strengthening, indicating that traditional financial market fluctuations may increasingly impact Bitcoin's price. Bitcoin has also decoupled from gold, which hit a record high last week, signifying a shift in investor preference towards traditional safe-haven assets in a risk-averse environment.

Overall, asset prices continue to be driven by inflation prospects. The slight strengthening of US core inflation suggests the Federal Reserve will be more cautious about rate cuts. We anticipate a smaller rate cut of 25 basis points rather than a more aggressive 50 basis points reduction.