Bitcoin (BTC) Faces Volatility Amid Fed Rate Speculations

Bitcoin recently experienced a significant rally, reaching $117,000, driven by market anticipation of a potential Federal Reserve rate cut. However, this upward momentum was short-lived as selling pressure prompted a retreat to $115,000, according to Glassnode.

Market Dynamics and Indicators

The spot market for Bitcoin revealed a decline in the Relative Strength Index (RSI) from overbought levels, coupled with a sharp fall in Cumulative Volume Delta (CVD) and low trading volumes. These indicators suggest diminishing demand and fragile market participation despite the recent price surge.

In the futures market, open interest remained steady near its highs, and funding rates saw a modest increase, indicating cautious optimism. However, the perpetual CVD entered heavy negative territory, reflecting strong sell-side pressure from leveraged traders.

Options and ETF Market Insights

The options market showed increased activity, with open interest surpassing its high band, suggesting stronger participation. The widening volatility spreads indicate rising uncertainty, while the skew’s upward movement reflects mild downside hedging. These factors collectively point towards heightened expectations for volatility, albeit without strong bearish sentiment.

U.S. spot ETFs experienced a cooling period following previous strong inflows. Net flows decreased significantly, and trade volumes remained stable. The Market Value to Realized Value (MVRV) ratio eased slightly, indicating tempered institutional demand. Although confidence remains, the slowdown suggests a potential pause in accumulation by traditional financial participants.

On-Chain and Off-Chain Indicators

On-chain fundamentals presented mixed signals. Active addresses and transfer volumes improved, signifying increased engagement and capital flows. In contrast, declining fees indicate reduced congestion and lower speculative demand, suggesting rising participation but with lighter transactional urgency.

Capital flows stayed steady yet cautious, with a slight easing in realized cap change and modest increases in Short-Term Holder/Long-Term Holder (STH/LTH) ratios. The hot capital share edged above the range, indicating growing short-term activity. While the structure remains balanced, elevated short-term flows could lead to increased volatility.

Profit and loss metrics showed improvement, with supply in profit, Net Unrealized Profit/Loss (NUPL), and realized profit/loss climbing, reflecting broad investor profitability and active profit-taking. Despite resilient sentiment and cautious bullishness, there is a growing risk of demand exhaustion as realization increases.

Overall, the market exhibits a ‘buy-the-rumor, sell-the-news’ pattern. Momentum lifted Bitcoin amid the Fed narrative, but weakening spot flows, heavy futures distribution, and softer ETF demand now exert downward pressure. While profitability and engagement provide support, further cooling is likely unless demand strengthens to counteract selling pressure.

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