Bitcoin price bounces to $41.5K, but derivatives data shows traders lack confidence
Key BTC trading metrics are sitting on the edge of the “worst outcome” scenario, suggesting that the current sell-off is far from over.
Bitcoin (BTC) briefly reached its lowest level in five months this Monday at $39,650, marking a 42.6% drawdown from the all-time high present on Nov. 22, 2021. Some argue that a “crypto winter” has already begun citing the $2.1 billion leveraged-long aggregate crypto futures contracts that were liquidated over the past seven days. The descending channel guiding Bitcoin’s negative performance for the past 63 days indicates that traders should expect sub-$40,000 prices by February.
Confidence from investors continued to decline after the United States Federal Reserve’s December Federal Open Market Committee session on Jan. 5. The monetary policy authority showed commitment to decrease its balance sheet and increase interest rates in 2022.
On Jan. 5, Kazakhstan’s political turmoil added further pressure to the markets. The country’s internet was shut down amid protests, causing Bitcoin’s network hashrate to tumble 13.4%.
To analyze how bullish or bearish professional traders are, one should monitor the futures premium, which is also known as the “basis rate.”
The indicator measures the difference between longer-term futures contracts and current market levels. A 5%-to-15% annualized premium is expected in healthy markets, which is a situation known as “contango.”