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What is happening 

On August 23, Bitcoin surprised the market by soaring over 6%, climbing from $60,700 to reach the $64,450 zone. This significant price spike came after Federal Reserve Chair Jerome Powell hinted at forthcoming interest rate cuts, signaling a shift in policy. 

Powell's comments sparked a surge in Bitcoin inflows, particularly into Bitcoin ETFs, injecting bullish momentum into the market. With bulls gaining control, optimism began to dominate the market, raising expectations of further Bitcoin highs.

However, the rally was short-lived. On August 28, Bitcoin experienced its largest drop since early August, part of a broader crypto selloff. 

Bitcoin lost more than 6% at one point before stabilizing at around $59,760. Ether also tumbled over 7% before recovering slightly to trade at about $2,522. 

This decline highlighted the volatility still present in the crypto market despite recent bullish trends.

Institutional investors

Bitcoin's recent price tumble occurred despite a strong inflow into U.S. exchange-traded funds (ETFs) for the cryptocurrency. Last week, Bitcoin spot ETFs saw net inflows of $506 million, with BlackRock's IBIT accounting for $318 million of that amount, raising the total value of these products to $58.4 billion.

BTC inflows continued this past week, with BlackRock’s Bitcoin ETF $224 million in inflows on Aug. 25.

Concerns have surfaced over potential U.S. government sales of seized Bitcoin, posing risks to the market. However, optimism remains, as Blockstream CEO Adam Back suggested that MicroStrategy's shares reaching $194 could signal Bitcoin hitting $80,000.

The Pearson Correlation metric reveals a growing 30-day correlation between Bitcoin (BTC) and traditional equities like the S&P 500 and NASDAQ. As Bitcoin increasingly acts like a risk-on asset, its correlation with the S&P 500 strengthens, while its safe-haven relationship with Gold declines. 

This shift is driven by easing inflation and the Federal Reserve's decision to pause interest rate hikes, promoting a favorable environment for risk-on trading. Consequently, both Bitcoin and equities have experienced bullish rallies, as investors seek higher returns in riskier assets.

Bitcoin dominance and open interest

Another key indicator, open interest, which represents the total value of all active derivatives contracts, dropped by 7.5% during Bitcoin's recent price dip, suggesting traders may be shifting their focus to altcoins. 

Despite this, Bitcoin's market dominance surged back above 57%, nearing a new 2024 peak. On Aug. 25, it reached 57.6%, close to its highest level since April 2021. With Bitcoin dominance up 11% this year, the anticipated "altcoin season" has yet to materialize.

When bull run?

Crypto trader and analyst Ali Martinez has observed a shift in the BTC bull-bear market indicator, signaling the potential for a major Bitcoin price breakout. 

After fluctuating between bullish and bearish ranges since early August, the indicator has now turned bullish again, suggesting another bull run may be on the horizon. Historically, similar shifts have led to significant price surges.

Martinez also noted that top traders on Binance are taking advantage of the recent dip, with 65.22% going long on Bitcoin. He outlined key support levels based on buying patterns:

These levels are critical for investors to monitor as Bitcoin's price dynamics evolve.

Analyst Will Woo recently shared a bullish outlook on Bitcoin's price, suggesting that the market is transitioning out of a short-term bearish phase. 

According to Woo, until early August, the market had been under pressure due to the influx of 100,000 BTC from events such as the Germany seizure, Mt. Gox payouts, and the U.S. DOJ, which created excess "paper BTC" through speculative trading.

However, the price crash in early August flushed out much of this speculative excess through a significant round of liquidations. Open interest was heavily reduced, marking a "healthy reset" of the market and reducing the speculative overhang that had been holding Bitcoin back.

From a demand-supply perspective, Woo believes the market has now shifted from short-term bearishness to a more neutral stance, with signs of a gradual recovery. 

Although Bitcoin is not yet in a clear bull market, the extended period of consolidation suggests the market is stabilizing rather than experiencing a prolonged bear phase.