As a seasoned crypto investor with a knack for deciphering market trends and navigating through volatility, I find myself cautiously optimistic about the current state of Bitcoin (BTC). Having witnessed numerous bull and bear runs over the years, I’ve learned to read between the lines in market data.
Bitcoin (BTC) has climbed approximately 6.5% from its low of $92,458 on December 23, yet it hasn’t been able to break through the resistance at $98,000. Traders have shown renewed optimism following a significant correction of about 14.5%, which occurred after reaching an all-time high of $108,275 on December 17.
In simpler terms, the attitude towards Bitcoin derivatives remained generally positive or bullish, implying that the extreme price swings didn’t greatly alter investors’ optimism. This stance increases the possibility of a prolonged increase in value surpassing $105,000.
In simpler terms, the price of Bitcoin futures contracts for one month is about 12% higher than the current market price. This suggests a high demand for people who want to buy Bitcoins on margin (using borrowed funds). Normally, premiums between 5% and 10% are seen as neutral, as the sellers take into account the longer settlement period when setting their prices.
Bitcoin put options are currently trading about 2% cheaper than comparable call options, which mirrors a pattern observed in the last fortnight. Typically, when large investors and market facilitators predict a possible price drop, this disparity can reach over 6%, indicating that put options are valued more highly due to their protective nature.
The surge in Bitcoin’s price beyond $98,000 was partially fueled by the rebound in conventional financial markets, as the S&P 500 index managed to wipe out its monthly losses by December 24th. Moreover, the yield on the US 10-year Treasury bond increased to 4.59% from 4.23% within a two-week period, indicating that investors are seeking greater returns when investing in government debt.
An uptick in U.S. Treasury yields generally stems from anticipation of increased inflation or growing government debt, which lessens the worth of existing bond investments. Conversely, assets that are hard to come by such as stocks and Bitcoin frequently thrive when central banks need to boost the economy through liquidity infusions.
Bitcoin faces stagnation fears amid economic uncertainty
In simpler terms, the potential growth of Bitcoin might be limited due to concerns about a possible global economic slowdown. It’s tough to foresee exactly how this could affect stock markets and real estate prices under these circumstances. Right now, Bitcoin’s relationship with the S&P 500 index is quite strong, with a correlation of approximately 64%.
In simpler terms, the U.S. Federal Reserve has revised its plans for reducing interest rates, predicting only two cuts in 2025 instead of the four it had earlier forecasted. This change could help prevent a drop in corporate profits and difficulties in obtaining loans for real estate transactions.
To gauge the public’s feelings towards the market, it’s crucial to scrutinize the margin markets of Bitcoin. Unlike derivative contracts that necessitate both buyers and sellers, margin markets enable traders to obtain stablecoins on loan to buy spot Bitcoin or borrow Bitcoin to open short positions, wagering on a price decrease.
As a crypto investor, I’m observing that the Bitcoin long-to-short margin ratio at OKX stands at 25 times, indicating a strong bias towards buying positions. In the past, when this ratio surpasses 40 times, it often suggests excessive confidence in the market, which can lead to potential corrections. On the other hand, ratios below 5 times, leaning heavily towards longs, are typically seen as bearish signs.
Although a large number of bitcoins were withdrawn from BlackRock’s Bitcoin Trust ETF on December 24th, the growth indicators in Bitcoin derivative markets and margin markets suggest that there is a strong optimism towards bitcoin. The fact that bitcoin held its ground during a recent retest of the $92,458 level on December 23rd also strengthens the belief that it could potentially reach $105,000 or even higher prices.
In this write-up, you’ll find information that serves a broad purpose, but it doesn’t constitute as legal or financial guidance. Please remember not to interpret it as such. The perspectives, beliefs, and viewpoints shared here are solely those of the writer and may not align with CryptoMoon’s views and opinions.
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2024-12-26 00:43