by Vincent Muthee
Bitcoin (BTC) has continued to face challenges despite rising expectations for a U.S interest rate cut in September. The largest cryptocurrency in the world has failed to provide a consistent price rally, despite market participants inclining towards a monetary policy ease.
At the same time, a concerning decline in trading activity has surfaced in the derivatives market. Data from Binance Futures, the biggest futures exchange for Bitcoin, shows a noticeable drop in trading volume. Analysts view this decline as a potential warning sign for the ongoing bull run.
Binance Futures Volume Signals Weakness
The past price rallies of Bitcoin have often aligned with increasing Binance futures volume. Each major push higher since 2020 came with stronger buying activity on the exchange, reinforcing the move. However, that trend is now absent as observed by CryptoQuant analyst Mignolet.
Mignolet noted that Bitcoin has climbed slightly, but Binance futures buy volume has not followed through. He warned that this pattern resembles the 2021 cycle when enthusiasm peaked but momentum for later stalled.
“This is very similar to the 2021 period. While spot liquidity is driven by ETFs and MSTR, futures liquidity is led by the Binance futures market. To be blunt, all liquidity is weakening. If this liquidity recovers, the market likely isn’t over yet,” Mignolet wrote.
The chart from CryptoQuant confirms this divergence. Whereas past surges showed clear links between Bitcoin prices and futures activity, the current cycle looks different. Without a rebound in Binance futures trading, the market may find it difficult to build lasting strength.
Taker Buy/Sell Ratio Raises Questions
Alongside volume, the Taker Buy/Sell Ratio on Binance has also drawn attention. In earlier phases of this bull market, a bullish divergence in the ratio often appeared when Bitcoin was forming a base or moving sideways. However, at the moment the ratio has declined to levels last recorded during the 2021 peak.
The drop in the Taker Buy/Sell Ratio means that there are fewer traders aggressively buying at the current price. This signals that the market is not experiencing the type of conviction that usually backs rallies.
However, Mignolet warned that a ratio on its own would be misleading, but a combination of poor Buy/Sell ratio with a declining volume would be more concerning. He encouraged traders to concentrate on real levels of participation instead of just being guided by sentiment indicators.
“The Taker Buy/Sell Ratio has coldly hit a low point in this current cycle, similar to its level at the 2021 price peak. We need to look at the actual volume, not just the ratio,” he advised.
September Rate Cut Odds Reach 100%
Despite a cautious outlook for Bitcoin and the general crypto market, stemming from on-chain metrics, positive macroeconomic factors could influence prices. In particular, the odds of a September rate cut have surged to 100% as per data by the CME Fed Watch Tool.
Fed’s decision for the much awaited September rate cut is scheduled on September 17. The data also shows that there is even an 11% probability that the Fed could make a greater cut of 50 basis points (bps). This would loosen the borrowing environment, and might spur risk asset demand, including Bitcoin.
Nevertheless, unless there is a revival in the futures activity the effect could be minimal according to market watchers. The forthcoming weeks could be decisive. Confirmation of a recovery in Binance futures volumes would reinstate confidence in the bull cycle. But, continued dip in the Binance futures volume could make even an accommodating monetary policy fail to sustain Bitcoin’s price rally.
#blockchain #crypto, #decentralized, #distributed, #ledger
