Bitcoin price loses steam, but futures markets predict it will be above $70k.
Bitcoin (BTC) fell 3.3% on May 14th, retesting the $61,000 support level, which quickly defended. More importantly, this correction marked the second failed attempt to break above $63,500 in a week. Despite the less-than-optimal price action as seen by BTC derivatives metrics, Bitcoin bulls remain confident.
Although the current Bitcoin price trend seems weak, some analysts still believe that it has a good chance to revisit prices above $70,000.
Trader and analyst Cryptotoad wondered how long the $60,500 support level lasted. However, he asserted that a higher high, perhaps closer to $67,000 daily, would be needed to break the current bearish pattern. Although this analysis does not rule out a price recovery, the trend clearly points to prices below $57,000 in May.
US inflation data will put short-term pressure on the price of Bitcoin
Investors' disappointment on May 14 stemmed in part from the US producer price index (PPI) for April, which showed a 0.5% month-over-month increase. The market interpreted the mass inflation as confirmation that the US Federal Reserve will hold interest rates longer, hurting riskier assets such as cryptocurrencies and growth stocks.
Some argue that inflation is inherently positive for Bitcoin's performance due to its tight monetary policy. However, in the early stages of fear and uncertainty, investors sought cash and short-term bonds. Two-year U.S. Treasury notes fell to 4.84% on May 14 from 5.03% on May 14, indicating that traders are paying higher prices for these fixed income instruments.
It may seem counterintuitive to seek protection from a recession in US Treasurys, but these assets are considered safer because they are government-backed, unlike money market funds managed by financial institutions. So, while higher-than-expected inflation data should have triggered negative sentiment for Bitcoin, this was not reflected in the initial data.
Bitcoin derivatives are showing resilience despite BTC's lack of price action
To analyze if professional traders are more pessimistic about Bitcoin following the drop to $61,000, one needs to examine BTC monthly futures contracts. In independent markets, these contracts trade at a 5%-10% premium to the BTC market to account for the longer settlement period.
The data suggests that the annual BTC futures premium is largely unaffected by worsening macroeconomic conditions and the failure of bitcoin's repeat price to sustain above $63,500 last week. The current 8% premium stands in the middle of the independent market, leaving a good margin for negative surprises.
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One should continue to monitor the Bitcoin options market to determine if hedging interest has increased following the recent price correction. Typically, if market makers and whales are anticipating a Bitcoin price decline, the BTC options skew metric will be above 7%, while bullish periods often show a drift below -7%.
BTC options' 25% delta skew has remained in neutral territory since May 8, which means market participants have placed calls (buys) and instruments similarly. According to this measure, the weakness in Bitcoin's price had no effect on how these professional traders assessed the risks of a downward swing.
Bitcoin bears got what they wanted, showing strength as the last daily move above $65,000 occurred three weeks ago.However, bulls seem unaffected by the lack of momentum, which appears to be largely due to a temporary shift in investors. to money places. Bitcoin's path to $70,000 for 2024 remains well in play as market participants may be forced to look for alternatives if the inflation issue in the US continues.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
