Crypto investors hedging out risks ahead of March rate hike
On-chain data analysis from Glassnode shows that Bitcoin investors are hedging out risks in order to stay protected against Federal Reserve interest rate hikes in March.
Glassnode’s The Week On-Chain newsletter from Feb. 14 indicates that the most significant trend in Bitcoin (BTC) right now is the flat futures term structure through March. This is strongly attributed to “investor uncertainty regarding the wider economic impact of a tighter US dollar.”
The rate hike is already priced in to spot markets, according to Cointelegraph contributor Michaël van de Poppe, but the longer term effect it will have is still unclear. As a result, Glassnode observed that investors are taking steps to protect themselves from the potentially low downside risk.
While the data clearly shows an objective flat area on the futures term structure curve, it suggests somewhat more subtly that investors are not expecting a significant bullish breakout through the end of 2022. The annualized premium on futures is only at 6% right now.
Annualized premium is the value above a dollar that a person will pay for the risk of a futures contract. A higher premium indicates a higher risk appetite.
On-chain data analysis from Glassnode shows that Bitcoin investors are hedging out risks in order to stay protected against Federal Reserve interest rate hikes in March.
More evidence of a lack of investor confidence is the slow but steady deleveraging through voluntary closure of futures positions. Such de-risking has resulted in what Glassnode sees as a decline in total futures open interest from 2% to 1.76% of the total crypto market cap. This trend hints at a “preference for protection, conservative leverage, and a cautious approach to storm clouds on the
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