Bitcoin (BTC) is approaching its Aug. 25 high of $65,200, a resistance threshold that could hold BTC in a consolidation zone for more weeks, according to the latest edition of the “Bitfinex Alpha” report.

BTC is up nearly 6% since the Fed cut the US interest rate by 50 basis points. Yet, the report highlighted that Bitcoin’s current rally is driven primarily by futures trading rather than spot market activity, which raises concerns about potential volatility and correction.

Derivatives-fueled rally

Global open interest (OI) in Bitcoin futures has reached $19.43 billion, surpassing the Aug. 25 value of $18.93 billion, while the price remains about $1,000 below the local high. This suggests that the current price movement is led by perpetuals and futures trading, contrasting with the spot market-dominated rally earlier this month.

Additionally, the spot market buying has slowed as the spot cumulative delta indicator flattened above $63,500. This development, coupled with increased futures activity, suggests the potential for a new lower timeframe range or partial correction.

Although this can be seen as a bearish sign, Bitfinex analysts pointed out that OI does not indicate how much leverage derivatives traders are using. The high OI is likely driven by investors’ renewed interest in speculating on risk assets such as Bitcoin after the rate cut.

Furthermore, altcoin speculation is also on the rise, with some tokens like SUI and AAVE seeing 100% gains since their August and September lows. However, altcoin open interest has also hit a higher high of $11.48 billion compared to the Aug. 19 peak of $10.74 billion.

ETF flows suggest otherwise

A counter-argument to potential consolidation is the renewed interest in spot Bitcoin exchange-traded funds (ETFs), which saw $397.2 million in net inflows last week after a period of outflows from Aug. 24 to Sept. 6.

The crypto market’s future direction may be influenced by broader market trends, particularly if the S&P 500 continues to rally beyond all-time highs and Bitcoin follows suit.

The report highlighted that risk appetite for Bitcoin from traditional finance has manifested itself through spot ETF inflows, historically contributing to a strong correlation between Bitcoin and the S&P 500.