Is Bitcoin Ready for a New All-Time High as Oversupply Disappears?
Bitcoin (BTC) experienced a 12.5% decline in price from March 14 to March 17, falling to $64,545, prompting heavy buying activity around the $65,000 mark. At the moment, opinions are mixed, and while the overexploitation in Bitcoin futures has been resolved, investors are still wondering if BTC will be able to raise the high of $73,755.
All eyes are on the Federal Reserve's monetary policy meeting.
Many investors believe that they are waiting for the US Federal Reserve's monetary policy meeting on March 20 before deciding to invest more in cryptocurrencies, despite the hope that interest rates will remain unchanged. This decision is more than short-term speculation, focusing on the Fed's confidence in the continued strength of the economy.
Another key uncertainty for Bitcoin investors is when the Fed will stop reducing its $7.5 trillion balance sheet. In general, a more expansive Fed monetary policy implies more money in circulation, which is beneficial to riskier assets.
The US monetary base represents currency and reserves in the banking system. Higher interest rates aim to stabilize or reduce this figure. By reducing the need for businesses to borrow and grow, this contractionary economic strategy often helps keep inflation under control.
Some analysts They predict that Bitcoin's potential bull run in 2024 will rely heavily on the Fed's transition from contractionary to accommodative monetary policy. A fall in inflation below 3 percent or signs of recession could trigger this shift. Therefore, the longer interest rates remain high, the less likely Bitcoin will rise.
Bitcoin futures and Asia's stable demand for the coin point to healthy growth
The oversupply has caused unrest among Bitcoin investors, especially as open interest in BTC futures reached a peak in March, rising from $22.2 billion on February 25 to $35.5 billion on March 14. Less durable.
Perpetual contracts, also known as reverse swaps, include an amount calculated every eight hours. A positive funding ratio indicates increasing leverage among those holding long positions.
An unusually high 0.09% funding was seen on March 11, which equates to 1.7% for the week. This indicator was rejected when the bulls faced $370 million from March 13 to March 15. While these figures may seem significant at first glance, when Bitcoin's open interest is estimated at $34.8 billion, approximately 1% of the positions are forcibly closed.
Interestingly, Bitcoin's funding rate fell to 0.25% on a weekly basis on March 15, which was considered neutral in a market where traders are typically bullish. This suggests that there was not excessive demand for short positions, even as bears hesitated to bet on Bitcoin prices below $65,000.
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It is important to compare this data to stable coin demand in China to ensure that the reduced demand for long positions accurately reflects market sentiment, which is where retail investors enter and exit the crypto markets. The USD Coin (USDC) premium measures the difference between the price of USDC in peer-to-peer transactions and the official US dollar.
The USDC premium has risen by more than 3% in the past week, indicating that the stablecoin is trading at a higher price than it has recorded. Notably, this premium did not fall below fair value even during the recent March 17 price adjustment to $64,545.
This trend indicates continued cryptocurrency demand in China, supports the positive Bitcoin funding rate for long positions and does not indicate a bearish trend or signs of investor concern.
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.
