Open Interest Sets Up Bullish Outlook
Revived demand for BTC-spot ETFs coincided with surging open interest (OI), signaling a breakout. Market intelligence platform Santiment commented:
”Top cap open interest is rising as we head into the weekend on sideways price action. Currently, open interest data shows: Bitcoin: $36.5B (+20.8% YTD).”
Rising OI does not necessarily signal a price breakout. However, upward OI trends, combined with increasing prices suggest new money entering long positions, a bullish signal.
Commentary on social media has turned bearish, according to Santiment, aligning with the bullish OI-BTC price signals. Santiment stated:
“According to social data, the commentary toward Bitcoin across social media has interestingly turned more and more bearish as prices have bounced this week. With markets typically moving the opposite direction of retail sentiment, the most FUD seen in 10 days may propel BTC to its first revisit above $100K since November 13th.”
The Bitcoin Test: US Labor Market and Inflation in Focus
This week, US labor market and inflation data will influence the Fed’s rate path and demand for risk assets. Softer labor market conditions and cooling inflation would likely revive bets on a March Fed rate cut, boosting demand for BTC.
Crucially, inflation numbers are likely to be key, given December’s upbeat US jobs report. Economists expect the US Core PCE Price Index to rise 2.7% year-on-year in November, down from a 2.8% increase in September.
According to the CME FedWatch Tool, the chances of a March cut fell from 53.9% on December 17 to 21.1% on January 17. Meanwhile, the probability of a June cut dropped from 84.1% on December 17 to 60.7% on January 17.
Bitcoin Fear & Greed Index Indicates Improving Sentiment
The rebound in demand for spot ETFs and Santiment’s price outlook aligned with the Bitcoin Fear & Greed Index’s recent trends. The Fear & Greed Index fell from 50 on January 17 to 49 on January 18, remaining in the Neutral zone. Despite the January 18 drop, the Index has climbed from 29 (Fear zone) over the week, indicating improved sentiment.