Bitcoin Brushes $61,000 Support Amid U.S. Inflation, Bulls Still Optimistic
Summary:
Bitcoin experienced a 3.3% fall on May 14, leading it to retest the $61,000 support line amid inflationary pressures in the U.S. and subsequent investor uncertainty. While this dip indicates a bearish trend, analysts like Cryptotoad believe Bitcoin can surpass $70,000 again. Derivatives indicators hint toward a neutral market state, with a current 8% premium. The Bitcoin options market also didn't show an anticipated surge in hedging. Despite lacking momentum, Bitcoin bulls remain positive due to investors' temporary shift to cash and potential future inflation in the U.S.
Bitcoin saw a 3.3% drop on May 14, falling back to meet the $61,000 support line, a level which was quickly veered back from. This dip symbolises the seconds attempt, in a week, to overtake the $63,500 mark which was unsuccessful. However, Bitcoin's bulls maintain a hopeful posture, as depicted by the BTC derivatives analytics. Whilst Bitcoin's latest price trend seems predominantly pessimistic, analysts speculate there is still room for it to revisit a position over $70,000. Analyst Cryptotoad is intrigued by the enduring strength of the $60,500 support line, although he believes a break in the current bearish pattern requires a daily close beyond $67,000. This analysis does not oppose a potential price rebound although it suggests the trend may hit lows of under $57,000 by May end.
Discontent from investors on May 14 was partially due to the US Producer Price Index figures for April, reflecting a 0.5% increase from the previous month. This amplified inflation further confirmed the Federal Reserve will sustain higher interest rates for an extended period, negatively impacting cryptocurrencies and other growth stocks. Some speculate that inflation inherently benefits Bitcoin, owing to its rigid monetary strategy. Yet, amidst the early stages of uncertainty and anxiety, investors often shift towards cash and short-term bonds. As rates on two-year US Treasury notes fell from 5.03% on May 1 to 4.84% on May 14, it appears traders are willing to pay more for these fixed-income securities.
Turning to US Treasury as a protection from economic depression may seem illogical. Interestingly, these assets are perceived as the safest due to their government backing, unlike funds managed by financial institutes. Therefore, while the reveal of higher-than-predicted inflation numbers should have deteriorated Bitcoin's sentiment, derivatives analytics showed no negative impact.
The resilience factor with Bitcoin derivatives is evident, regardless of underwhelming Bitcoin price actions, and can be evaluated through BTC's monthly futures contracts. In neutral markets, these contracts are usually traded at a 5% to 10% premium compared to BTC spot markets, this factors in the longer settlement duration. The current 8% premium lies midway in the neutral market, leaving enough space for negative upheavals.
To identify whether the request for hedging surged post the latest price adjustment, the Bitcoin options market should be assessed. Typically, if whale traders and market makers anticipate Bitcoin's price to fall, the BTC options skew metric will exceed 7%, whereas a skew below -7% reflects periods of exuberance.
According to reports, the BTC options 25% delta skew remained in a neutral state since May 8. This indicates the bearish price movement didn't influence the risk evaluations of professional traders for potential downward trends. Bitcoin bears have exhibited strength over the past weeks, with the last daily close over $65,000 recorded on April 23. Nevertheless, this hasn't affected the morale of the bulls, which seemingly is influenced by investors' temporary shift towards cash positions. If inflation in America persists, Bitcoin's potential to attain the $70,000 mark by 2024 could continue to be feasible. Please note that this report doesn't offer financial advice or endorsements. Each investment involves risk and demands individual research.
Published At
5/14/2024 11:14:26 PM
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