On January 13th, Bitcoin (BTC) saw considerable selling force, dipping below $90,000 for the first time in eight weeks. This dip signified a decrease of about 12.5% over a seven-day period, causing traders to feel less enthusiastic. However, despite this drop, indicators related to Bitcoin derivatives hinted at a neutral to bearish perspective, implying that major investors and market influencers largely remained indifferent or even skeptical towards the recent downturn.
Monthly Bitcoin futures contracts often cost more than the current spot price because they have a longer timeframe for settlement. The current 11% annual premium is higher than the usual range of 5% to 10%, suggesting that investors are feeling particularly optimistic about the market. Also, the funding rate on perpetual Bitcoin contracts, which are popular among individual traders, has consistently been positive, implying a generally neutral or positive outlook.
On January 13th, for a short while, the funding rate became negative because there was increased interest in selling positions, or being bearish. This happened simultaneously with the termination of $107 million worth of highly leveraged long positions. Yet, the indicator soon stabilized at a 0.5% monthly rate, demonstrating no prolonged bearish mood in Bitcoin futures trading.
Bitcoin price pressured as investors exit risk markets
After the S&P 500 index fell short of staying above 6,000 on January 6th, investor confidence weakened significantly, leading to a drop of about 4.1% over the next week. The unexpectedly robust US employment report sparked worries that the Federal Reserve could maintain higher interest rates for a longer period than initially thought.
Due to this uncertainty, the yield on 10-year U.S Treasury bonds has risen to its highest point since November 2023, indicating that traders are asking for a higher compensation to keep government bonds. This pattern frequently suggests worries about inflation or an economic downturn, which is made more significant by the poor performance of the overall stock market.
A strengthening of the U.S. dollar relative to a group of other global currencies, as indicated by the DXY index, suggests that significant investors are adopting a more conservative approach, preferring cash and short-term bond investments. The escalation of geopolitical tensions became evident after the U.S. enforced tougher sanctions on Russian crude oil exports, potentially disrupting supply lines to important consumers such as China and India, according to Yahoo! Finance.
Some experts suggest that Bitcoin‘s recent success may be excessively influenced by MicroStrategy. On January 13th, the company declared the completion of another Bitcoin acquisition, purchasing an additional 2,530 Bitcoins within a week. This now boosts its total Bitcoin holdings to a significant amount, backed by $6.5 billion in authorized stock sales. Furthermore, the organization intends to generate an extra $2 billion through the issuance of perpetual preferred stocks.
Institutional Bitcoin flows signal mixed sentiment
Over a two-day period, US-traded Bitcoin exchange-traded funds (ETFs) experienced withdrawals totaling $718 million, sparking debate about institutional interest in Bitcoin. Yet, the previous three sessions saw inflows worth $1.94 billion, suggesting it may be too soon to assume a decline in demand for Bitcoin. Despite recent volatility, Bitcoin has managed a 37% increase over the last 90 days, demonstrating its robustness.
As an analyst, I find it crucial to factor in the risks stemming from a possible worldwide economic deceleration, given that uncertainties are prompting investors to opt for cash holdings. Regardless of President-elect Donald Trump’s future policies, the financial situation of the U.S. in 2025 is expected to stay difficult to navigate.
In a situation where there’s not much room to adjust policies without potentially causing inflation, the possibility of an economic downturn (or recession) becomes quite real. Given this context, investors might be less inclined to take risks with Bitcoin in the short term, preferring instead to focus on safer investments.
This piece is designed primarily to provide general knowledge and shouldn’t be construed as legal or financial guidance. The perspectives, assumptions, and viewpoints shared in this article belong solely to the writer and may not mirror or align with those held by CryptoMoon.
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2025-01-14 00:00