Prolonged consolidation, as a rule, leads to a sharp discharge in the financial markets. For four months, Bitcoin has been “circling” around $ 40 thousand, and the denouement may occur as early as next week.
The volume of trading in perpetual Bitcoin futures (without the actual supply of cryptocurrency) last year equaled the volume of the spot market due to the large influx of speculators and short-term investors. However, in the last eight months, a significant drop in the volume of trading in derivatives has been recorded: from an average of $70-80 billion to the current $31 billion per day.
The financing rate is the trader’s fee for holding an indefinite futures contract.
If the majority buys, then they pay a bid in favor of sellers for holding a long position (purchase). Accordingly, in the case of the prevalence of bears, the rate becomes positive already for buyers.
This tool perfectly visualizes market sentiment. Now the financing rate is showing a significant compression and indicates both a drop in trader activity and growing uncertainty in the market.
The argument for the growth of Bitcoin is the strong accumulation sentiment in the spot market. According to the analytical agency CryptoQuant, the total Bitcoin reserves of the 21st tracked exchange are at their lowest level since September 2018. At the same time, the outflow of coins from cryptocurrency exchanges is close to record levels.
Earlier we explained why the efforts of crypto enthusiasts alone are not enough to increase the price. Institutional investors continue to wind down investment programs, and US GDP entered negative territory in the first quarter. Now the yield on cryptocurrency futures is 3%, which is comparable to the yield of 10-year bonds, and that is significantly lower than inflation of 8.5%. In the absence of confidence in the imminent growth of Bitcoin, investors are shifting to more profitable assets.
On May 3-4, the next meeting of the Fed will be held, at which the key rate can be raised immediately by 0.75% (under favorable circumstances, the rise is carried out by 0.25%). This will increase the long-term value of the dollar, increase the risk of a recession in the US and may trigger a sell-off of risky assets such as Bitcoin.
In anticipation of a new correction, various analytical agencies are calculating the strongest level for Bitcoin, below which the price is unlikely to fall. According to Whalemap, this level is a zone of $25-27 thousand. At the same time, whales are ready for active purchases already at $ 34 thousand, and the current cost of Bitcoin mining for miners is approximately at the same level.