Improving Bitcoin price indicators show that the bears’ confidence below $95K BTC is waning

Bitcoin (BTC) has struggled to keep prices above $95,000 since December 28, but demand for leveraged positions has waned. During this period, the bulls faced $470 million in liquidation, while the bears lost their appetite, especially as Bitcoin tested the level below $92,000.

Measured by open interest — the total number of contracts in all bitcoin futures markets — the positions fell to their lowest level in two months. While bears have dominated in the short-term, their declining appetite suggests further downside potential for Bitcoin's price.

Bitcoin futures on December 20, 2024 peaked at BTC 668,100, but 11% of those positions were closed. The current level of BTC 595,700 is the lowest since November 4th, although this does not signal defeat for the bulls.

As both bulls and bears are always present in the market, the futures premium gives a clearer picture of which side is looking for more leverage. Typically, monthly contracts have an annual premium of 5% to 10%, and premiums above that range exhibit strong bullishness.

On December 28, the 1-month BTC futures premium briefly approached neutral levels, reaching 9.5%, but quickly bounced back above the 10% threshold. Currently, the premium is at 15%, the highest since December 20, 2024, indicating that despite recent Bitcoin price weakness, the bulls will be blamed.

US Treasury Secretary Janet Yellen's comments provided much-needed optimism for Bitcoin buyers. On December 27, 2024, Yellen wrote to congressional leaders warning that unless Congress or the Treasury Department acted, the federal government could hit the debt ceiling by January 14.

House Speaker Mike Johnson further complicated the issue by saying that the $1.5 trillion debt limit could only be raised in reconciliation with $2.5 trillion in “net obligation spending” reductions, according to Yahoo Finance. Cuts in government spending typically have a negative impact on the stock market, causing traders to take a more risk-averse stance.

RELATED: Bitcoin analysis sees ‘low risk aversion' as retail demand rises 13%

Bitcoin's Fiscal Controversy Worries Reduce Appetite But Improve ETF Hedging Appeal

A primary challenge for the incoming Trump administration is the fraction of hard-line Republicans who historically oppose raising the debt limit. According to Yahoo Finance, at least two dozen House Republicans are taking this position, putting a compromise deal in jeopardy.

For Bitcoin investors, the potential fiscal crisis presents both bullish and bearish implications. While short-term uncertainty may dampen investor appetite, analysts suggest the $105 billion in Bitcoin exchange-traded funds (ETFs) has helped establish the cryptocurrency as an alternative hedge.

Additionally, perpetual futures serve as an indicator of retail traders' appetite. Exchanges adjust the exchange rate based on demand and demand imbalances. In independent markets, longs (buyers) typically pay 0.4% to 1.8% monthly, with rates above this range indicating increased bullishness.

The current 1.3% monthly yield is the highest in more than two weeks, although it remains in neutral territory. As a result, despite the decrease in open interest, the parameters of Bitcoin derivatives have improved. This indicates that Bitcoin bears are not sure to increase their positions below $95,000, which gives a positive view to the price.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.