Bitcoin (BTC) experienced a slight 2.2% correction on September 11th following the release of US consumer inflation data. However, it quickly rebounded and reclaimed the $56,500 level within a few hours. This movement closely mirrored the decline of the S&P 500 index, which saw a 1.6% drop on the same day as the US Consumer Price Index growth reached its lowest level in over three years.
Despite surviving the volatility caused by the Consumer Price Index, Bitcoin traders remain doubtful about the possibility of further gains. This doubt stems from the increased demand for bearish positions using BTC futures contracts, leading to skepticism that the $58,000 resistance level will be breached.
Analyzing the price action over the past three days reveals a strong correlation between Bitcoin and the US stock market in the short term. This correlation is often observed during significant events, such as the anticipation of macroeconomic data or upcoming decisions from the US Federal Reserve (Fed).
Investors had hoped that the slightly lower inflation rate on September 11th would prompt the central bank to adopt a more aggressive interest rate cut. However, the negative initial reaction in the stock market suggests that this is unlikely. The US Core Consumer Price Index grew by 2.5% year-over-year in August, but when excluding food and gas, prices increased by 3.2%.
From a trading perspective, this data decreases the likelihood of a 0.50% interest rate cut on September 18th, which had a negative impact on the stock market. Opinions may vary on how inflation should impact Bitcoin’s price, especially when considering US debt financing costs. The US Congressional Budget Office projects that interest payments will exceed $1 trillion by 2025. Therefore, the longer the Fed keeps rates elevated, the more pressure it adds to government spending. In the long term, this inflationary trend could benefit Bitcoin’s price, despite its recent failure to break above $58,000 on September 10th.
However, attributing Bitcoin’s inability to maintain bullish momentum solely to macroeconomic data seems inconsistent, as it has not closed above $60,000 since August 27th. Some analysts point to outflows from spot Bitcoin exchange-traded funds (ETFs), while others cite ongoing regulatory uncertainty for exchanges, services, and intermediaries.
The demand for leverage Bitcoin longs has been low, indicating a lack of confidence among traders. This can be observed through BTC futures contracts, which serve as a key indicator of investor risk appetite. Positive funding rates on perpetual contracts suggest an optimistic market, while rates below 0.6% per month are considered bearish. Data shows that the Bitcoin funding rate has been predominantly negative since September 7th, despite the cost to enter bearish positions using leverage remaining below 0.6% per month. This indicates that bears also lack clear confidence.
To determine if this sentiment extends beyond perpetual futures, it is useful to examine Bitcoin options markets. A negative skew indicates higher demand for call (buy) options compared to put (sell) options, while neutral markets typically display a -6% to +6% delta skew. Currently, Bitcoin’s 25% delta skew stands at 4%, indicating that put options are trading at a slight premium. This metric has remained relatively flat over the past week, suggesting neutral sentiment despite the retest of the $53,000 support level on September 7th. Therefore, it would be incorrect to conclude that traders have turned bearish solely due to the negative funding rate on perpetual contracts.
While it is difficult to predict whether the lack of demand for leveraged longs will reinforce the $58,000 resistance in the near term, the chances of a bullish move towards $60,000 will likely depend on how the stock market reacts to the recent Bitcoin price movements.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.