Bitcoin: The case for and against a ‘wild bullish impulse’ anytime soon
There’s a growing sense of uncertainty within crypto investors concerning theFederal Reserve interest rate hikes in March. The latest Glassnode’s The Week On-Chain newsletter published on 14 February gave insights about this upcoming storm.
The expected rate hikes flattened the futures term structure through March. This signals a clear investor uncertainty regarding the wider economic impact of a tighter U.S dollar, given the preceding decades of loose monetary policy.
Source: Glassnode
The aforementioned graph shows an objective flat area on the futures term structure curve, echoing the sentiment that investors are not expecting a significant bullish breakout through the end of 2022.
Futures out to the end of 2022, for instance, have been trading with a very modest 6% annualized premium. This suggests the market is quite far from “anticipating a wild bullish impulse any time soon.”
Annualized premium is the value above a dollar that a person will pay for the risk of a futures contract. A higher premium indicated a higher risk appetite.
As per thereport,
“It appears that investors are deleveraging and utilizing derivatives markets to hedge out risk, and buying downside protection with a keen eye on the Fed rate hikes expected in March.”
There was a “notable de-leveraging across futures markets” this week. Such de-risking resulted in a decline in total futures open interest from 2% to 1.76% of the total crypto market cap. Ergo, pointed at “preference for protection, conservative leverage, and a cautious approach to storm clouds on the horizon.”
Bitcoin proponents held their positions despite the circumstances. Be it Fed rate hike, Increased selling pressure etc. Bitcoin outflows from exchanges highlight this narrative.
Source:
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