Bitcoin Drops 14% after Record High: Traders Remain Mildly Bullish Amid Market Fluctuations
Summary:
Bitcoin's value dipped 14% to $59,300 after achieving a high of $69,150 on March 5th. BTC derivatives data suggests that despite fluctuations, professional traders still hold a slightly bullish stance. Concurrently, the Nasdaq-100 index futures experienced a 2.6% retraction. Expectations of Bitcoin breaking above $70,000 soon are low among professional traders. As Bitcoin reaches an all-time high, there's no excess optimism, but due to inflows into the spot Bitcoin exchange-traded fund (ETF), Bitcoin's price might continue its bullish trend, regardless of traditional market performance.
Bitcoin went through a 14% dip in price, dropping to $59,300 after it hit its all-time high of $69,150 on March 5. Currently, the focus is on regaining the $64,000 support line. Despite the minor volatility observed today, BTC derivatives data reveal that pro traders remain mildly bullish. The decline in Bitcoin's value closely followed a 2.6% decrease on the Nasdaq 100 index.
Strikingly, the Nasdaq-100 index futures, focused heavily on technology, hit its all-time high of 18,377 just a day before Bitcoin's record, on March 4. Early warning signs of turbulence in the stock market emerged following a decrease by 24% in Apple iPhone sales in China, as estimated by a consumer research company.
Additionally, shares of New York Community Bancorp (NYCB) kept dwindling in value after the bank appointed a new CEO due to "material weaknesses" in their internal operations. Amidst this turmoil, investors found a safe haven in gold, with the precious metal witnessing a 4.2% increase in four days, trading close to its all-time high.
Notably, Bitcoin’s new record price has drawn substantial media coverage, potentially compelling big-time investors to contemplate shorting or prompting existing holders to minimize their positions in response to common fears, uncertainties, and doubts stirred up by Bitcoin critics.
For instance, significant attention was drawn to the financing rate on Bitcoin perpetual contracts when it exceeded 1% per week on February 28. This specific metric, suggesting investor optimism, has been noteworthy for the past few months, as highlighted by a user on X social platform.
Nevertheless, it would be misguided to attribute Bitcoin's sharp price fall entirely to its financing rate. This rate could remain above 1% per week for a considerable duration without instigating bullish investors to close their longs. Some traders lack access to traditional funding, while others disregard the fees amidst favorable market conditions.
Furthermore, it is incorrect to use retail traders as a measure of overheated markets since cryptocurrency investors generally show a bullish inclination. Professional traders, on the other hand, usually prefer monthly future contracts to prevent fluctuating funding rate costs. In equilibrium markets, these instruments carry a 5% to 10% premium, reflecting their extended settlement period.
Data display that the BTC futures premium was consistent at 15% throughout the $5,765 price shift on March 5. Essentially, this indicates that major players and market makers stay bullish despite the correction after the all-time high. It also suggests that it matters little whether $62,000 or $64,000 becomes the support. Notably, even at the all-time high, the BTC futures premium didn't exceed 20%, portraying a cautious bullish sentiment among traders.
To eliminate factors influencing only futures markets, it’s crucial to evaluate Bitcoin options metrics. A good measure of whether arbitration desks and market makers are excessively charging for protection against price rise or fall is the 25% delta skew.
As shown above, the 25% delta skew sits at -7%, placing it on the border between neutral and bullish markets. Of note, Bitcoin option traders displayed extreme enthusiasm last on 19 Feb when the indicator hit -12%. Hence, the options market backs the idea that professional traders doubt Bitcoin’s chances to surpass $70,000 soon.
Typically, during uncertain times, investors find safety in short-term bonds and cash. This explains the lack of excessive optimism as Bitcoin hits an all-time high. However, this situation might change as the inflow into the spot Bitcoin exchange-traded fund (ETF) has started taking some capital from gold. This implies that BTC's price could potentially maintain its bullish trend regardless of how traditional markets fare. This article does not provide investment advice but is an interpretation of the current market conditions.
Published At
3/6/2024 12:05:16 AM
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