Bitcoin is still following the stock market, especially with traditional finance investors pulling back as we head into September.

With spot ETF outflows increasing, folks are clearly de-risking before the Federal Reserve’s rate cuts. Altcoins are showing resilience, eating away at Bitcoin’s market dominance.

The first week of September wasn’t kind to Bitcoin. It continued its late-August slump, dropping to $52,756 by September 6. This is below a key level of $56,711, last hit on May 1.

That $56,711 level is important because every time Bitcoin dropped there, it rebounded fast, within two to three days. Right now, the asset’s fate depends on ETF and spot market flows. If equities stabilize, BTC could recover.

May 1 also stands out because global open interest (OI) for Bitcoin hit its first major low after reaching an all-time high of $39.03 billion on March 29. 

When BTC drops below these kinds of levels, it usually triggers leveraged liquidations, especially in altcoins. But the good thing about those is they help flush out speculative excess from the market.

Since Bitcoin hit its all-time high of $73,666, the asset has experienced three major price corrections: May 1, July 5, and August 5. Each of these corrections coincided with a drop in open interest.

It’s currently up about 10.4% from the August 5 low, while open interest has increased by 6.67%. This shows a healthy correlation between price and OI. 

But analysts don’t see this as a bottom signal, though Bitcoin could stay in this range or rise slightly unless there’s another wave of spot selling or de-risking.

The major reason for Bitcoin’s sell-off last week was the SPX’s downturn. The S&P 500 fell 4.25%, the worst week for the index since March 2023. BTC fell 5.45% during the same period. 

For context, in late July, the SPX fell 2.06%, while BTC dropped by 14.9%. This time, the drop was less extreme, which could be a sign that sellers are getting tired.

That would explain why altcoins are now showing more strength. Open interest for altcoins listed on major exchanges (excluding Bitcoin and Ethereum) is down 55% from its March 25 all-time high. The aggregated open interest is at $8.75 billion.

The ETH/BTC ratio is currently below 0.042, the lowest since April 2021. Since the Merge, Ethereum has underperformed Bitcoin by over 44%. 

Even though there was a brief uptick before the launch of its ETFs, Ether has continued to struggle against Bitcoin.

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