As an experienced analyst, I have closely monitored the recent price action of Bitcoin (BTC). Although the correction on May 14 marked a second failed attempt within a week to surpass $63,500 and resulted in a 3.3% drop, bulls remain optimistic based on derivatives metrics. The $60,500 support level held strong, but a higher high is needed to break the current bearish pattern.
Bitcoin experienced a 3.3% decline on May 14th, reaching a test of the significant support level at $61,000. This level was effectively fortified. It’s worth noting that this correction represented the second unsuccessful attempt in a week to exceed the resistance level of $63,500. The bullish sentiment towards Bitcoin remains undeterred as evidenced by relevant data from Bitcoin derivatives.
As a financial analyst, I’ve noticed that the Bitcoin price trend is currently showing bearish signs. However, I also want to highlight that there are reputable analysts who hold a contrasting view. They believe that Bitcoin still carries a strong potential to surpass the $70,000 mark once again.
As a researcher studying the cryptocurrency market, I’ve noticed that the support level at $60,500 has been quite resilient for trader and analyst Cryptotoad. Nevertheless, I believe that a new high, preferably a daily close above $67,000, is required to shift the current bearish trend. Although there’s a possibility of a price bounce back, my analysis suggests that we might see prices dropping below the $57,000 mark in May.
U.S. inflation data puts short-term pressure on Bitcoin price
On May 14th, investors expressed disappointment, and this discontent was partly fueled by the US Producer Price Index (PPI) data for April. This data revealed a 0.5% monthly rise. The market took this to mean that inflationary pressures in the wholesale sector were on the rise. Consequently, many investors believed that the US Federal Reserve (Fed) would maintain higher interest rates for an extended period, which could negatively impact assets considered riskier, such as cryptocurrencies and growth stocks.
Some maintain that Bitcoin’s strict monetary policy makes inflation beneficial for its growth. Yet, during periods of anxiety and doubt, investors often prefer cash and short-term bonds. The decrease in the yield on 2-year U.S. Treasury notes, which dropped from 5.03% to 4.84% between May 1 and May 14, reflects traders’ increased demand for these secure investments.
Seeking refuge in U.S. Treasuries during economic downturns may appear contradictory, as they are often perceived as less appealing than other assets due to their lower returns. However, the allure of these securities lies in their solid foundation – they’re backed by the full faith and credit of the U.S. government, unlike money market funds which are managed by financial institutions.
Bitcoin derivatives show resilience despite lackluster BTC price action
To determine if professional traders have grown more bearish towards Bitcoin after its decline to $61,000, it would be beneficial to assess the price difference between Bitcoin’s monthly futures contracts and its current spot price. In stable market conditions, the gap between these two usually ranges from 5% to 10%, due to the extended settlement duration associated with futures contracts.
The data reveals that Bitcoin’s annualized futures price difference, or premium, remained relatively unchanged despite the deteriorating macroeconomic situation and repeated price drops below $63,500 over the past week. Currently, the premium hovers around 8%, placing it within the neutral market range, providing ample room for potential price declines.
As an analyst, I would recommend examining the Bitcoin options market to assess whether the need for risk hedges has intensified following the recent price correction. Normally, if market participants anticipate a Bitcoin price decline, the BTC options skew surpasses 7%, whereas periods of bullish sentiment are characterized by a skew below -7%.
As an analyst, I’ve observed that the BTC options 25% delta skew has maintained a neutral stance since May 8th. This signifies that market participants have valued call and put options equivalently. In simpler terms, the price decrease in Bitcoin hasn’t influenced these professionals’ risk assessments for potential downside fluctuations based on this metric.
Bitcoin’s bearish investors celebrated a victory when the cryptocurrency failed to close above $65,000 for the past three weeks, last seen on April 23. Conversely, bullish investors seemed unfazed by the absence of momentum, which seems primarily fueled by temporary investor moves towards holding cash. With persistent inflation in the U.S., market players might consider seeking alternative investments, increasing the likelihood that Bitcoin will reach $70,000 by 2024.
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2024-05-14 23:30