Bitcoin

Bitcoin (BTC) marked a bullish beginning to the week by reaching new month-to-date highs, surpassing $27,000 on September 18. This surge of over 3% came as the week closed on a positive note in Wall Street trading.

Caution Amid Rising Open Interest

While the BTC price gained momentum, concerns arose about the surging open interest in Bitcoin futures contracts. Within hours, open interest increased by nearly $1 billion, reminiscent of a previous Grayscale-related incident.

BTC/USD 1-day chart. Source: TradingView

As Bitcoin broke the $26,800 barrier and aimed for $27,200, traders sensed an upward trend. Altcoins also started to show signs of life, making it an opportune period for asset acquisition.

Monitoring Buy Signals

Material Indicators, a tracking resource, issued daily buy signals for its proprietary trading tools, indicating growing bullish sentiment among traders.

BTC/USD annotated chart. Source: Michaël van de Poppe/X

Analyst Rekt Capital emphasized the importance of Bitcoin bulls regaining and maintaining higher price levels throughout September. He pointed to the crucial $27,100 mark, which previously acted as support and could now become resistance unless BTC closes the month above it.

BTC Unfazed by DXY Strength

Despite the impending Federal Reserve decision on interest rates scheduled for September 20, the U.S. Dollar Index (DXY) exhibited strength above 105, a level unseen since March. Historically, Bitcoin has shown an inverse correlation with the DXY, but it continued its ascent, reaching $27,000.

BTC/USD annotated chart. Source: Rekt Capital/X

James Straten, a research and data analyst at CryptoSlate, highlighted the stark contrast between the DXY’s strength and Bitcoin’s performance. He noted that the last time the DXY was at 105, Bitcoin was trading at under $20,000, demonstrating Bitcoin’s resilience to DXY movements.

Investors have driven up the price of Bitcoin by more than 2.5% today, reaching a September high of over $27,400. This surge follows a weekend where Bitcoin maintained the critical $26,000 level, instilling confidence in traders and analysts. The upswing can be attributed to several key factors.

Annual Core CPI Falls Ahead of FOMC

The recent Consumer Price Index (CPI) report from September 13 indicates that inflation rose to 3.7% in August, slightly higher than July’s 3.5%. However, the annual core CPI, which excludes food and energy prices, showed more promising data. August’s annual core CPI stood at 4.3%, a slight dip from the previous month’s 4.5%. This suggests that inflation might not reach the U.S. Federal Reserve’s 2% target, raising hopes for a pause in interest rate hikes at the upcoming Federal Open Market Committee (FOMC) meeting on September 20. Investors see this as a positive development for risk assets like Bitcoin.

Bitcoin price. Source: TradingView

Institutional Interest in Bitcoin

Institutional interest in Bitcoin is also bolstering market sentiment. Several major institutions have applied for Bitcoin exchange-traded funds (ETFs) following a favorable ruling for Grayscale Bitcoin Trust (GBTC) by U.S. Court of Appeals Circuit Judge Neomi Rao on August 29. Companies like BlackRock and Fidelity Investments are showing growing interest in Bitcoin, with Franklin Templeton recently filing for a spot Bitcoin ETF. While the SEC has yet to approve a spot Bitcoin ETF, institutional interest remains high, and another postponement of the SEC’s decision deadline on October 16 is likely.

BTC balance on exchanges. Source: Coinglass

Declining Bitcoin Supply on Exchanges

Bitcoin’s price rally coincides with a decrease in BTC supply on exchanges, which has fallen since the September 4 peak. This trend is seen as a bullish signal because it reduces the available supply for spot selling. With Bitcoin continually leaving exchanges, short liquidations have had a notable impact on price. In the past 24 hours, over $28.4 million worth of BTC shorts were liquidated, with $27.9 million liquidated in just 12 hours. Despite short-sellers dominating the futures market, there is potential for a short squeeze, potentially driving Bitcoin prices even higher.

Bitcoin Fear & Greed Index. Source: Alternative.me

While Bitcoin shows short-term bullish momentum ahead of the FOMC meeting, the Bitcoin Fear & Greed Index still signals “fear,” albeit with a slight improvement from the previous month.

Recent data reveals a significant shift in the relationship between Shiba Inu (SHIB) and Bitcoin (BTC). Over the last 30 days, the correlation between SHIB and BTC has plummeted to a mere 0.42. This marks a stark departure from the beginning of the week when the correlation stood at a high 0.96. The declining correlation indicates that SHIB is increasingly charting its own path, no longer tethered to Bitcoin’s price movements.

Extended Perspective: 60-Day Correlation

Zooming out to a 60-day timeframe, the correlation between Shiba Inu and Bitcoin was 0.5. This suggests that parallel price movements between the two cryptocurrencies are becoming less likely. SHIB is demonstrating a growing independence from Bitcoin’s influence.

Interestingly, Shiba Inu’s 30-day correlation with Ethereum (ETH) stands at a robust 0.84, further emphasizing its evolving autonomy. Additionally, SHIB’s correlation with its competitor, Dogecoin (DOGE), is at 0.56.

Factors Driving Shiba Inu’s Independence

This shift in correlation is not coincidental. Shiba Inu’s journey towards independence is attributed to significant developments within its ecosystem. In July, SHIB emerged as a top gainer, surging by over 12%. This spike in price was closely tied to a surge in developer activity on the Shiba Inu network. During that period, notable milestones included the introduction of self-sovereign identity (SSI) and progress on the much-anticipated Shibarium project.

However, the fortunes of Shiba Inu took a downturn when Shibarium paused shortly after its launch on August 16. As a result, SHIB has struggled to recover from the losses incurred in August, currently down by 7.13% in September.

What Lies Ahead for Shiba Inu?

In the coming days, the evolving correlation between Shiba Inu and Bitcoin will serve as a critical indicator. It will determine whether SHIB continues to mirror the broader market’s fluctuations or maintains its unique trajectory, influenced by the ongoing developments within its ecosystem.

As of the latest update, Shiba Inu has seen a slight increase of 0.68% in the past 24 hours, with its price reaching $0.0000074. Observers eagerly await further insights into the future direction of this cryptocurrency.

Cryptocurrency markets remained relatively stable as the latest U.S. inflation data indicated a surge in consumer prices. The Consumer Price Index (CPI) revealed a 3.7% year-over-year increase in August, slightly surpassing economists’ expectations of 3.6%. This news had a muted impact on crypto prices.

Inflation Contributors and Crypto Performance

The month-to-month CPI rose by 0.6% in August, compared to 0.2% in both July and June. The primary driver behind this larger increase was soaring gasoline prices, accounting for more than half of the overall CPI rise. Despite the inflation concerns, Bitcoin’s price remained steady around $26,100, while Ethereum saw a minor 0.5% decline to approximately $1,600. Other altcoins like Cardano and Polkadot also experienced slight losses.

The report on inflation, coupled with other economic indicators like the strength of the U.S. labor market and the Personal Consumption Index (PCI), will be vital factors for the Federal Reserve as it approaches its upcoming interest rate announcement on September 20. The Federal Reserve has taken a more hawkish stance in response to inflation that reached 9.1% in June, marking the highest annual increase since 1981. The central bank raised its benchmark interest rate to a range of 5.25% to 5.5% in July, a 22-year high, following a previous rate hike in June.

Cryptocurrency and Interest Rate Dynamics

Higher interest rates, intended to cool economic activity by increasing the cost of borrowing for businesses and consumers, have also impacted the cryptocurrency market and other risk assets like stocks. As interest-bearing assets like U.S. Treasuries become comparatively more appealing to investors, cryptocurrencies face competition for investment.

While inflation has decreased significantly since its peak in June, it continues to outpace the Federal Reserve’s target of 2% annually. The Fed’s decision to raise interest rates reflects its commitment to addressing inflation concerns.

Market Expectations and Future Outlook

Market sentiment suggests a 91% likelihood that the Federal Reserve will maintain current interest rates in its upcoming meeting, with only a 5% probability of a rate cut in January of the following year, according to the CME Group’s FedWatch Tool.

Despite rising inflation, cryptocurrency markets exhibited stability following the release of the latest CPI data. The Federal Reserve’s monetary policies and their impact on interest rates will continue to be closely monitored by both traditional and crypto investors as they assess the broader economic landscape.