Strong corporate earnings and investor expectations of a Federal Reserve turnaround help strengthen the case for risk assets like Bitcoin.
On January 20, the price rose above $22,500 and managed to defend that level, accumulating a 40.5% gain in January. The move was accompanied by improvements in the stock market, which rose after China lifted its COVID-19 restrictions after three years of strict epidemic control.
E-commerce and entertainment companies lead the market’s year-over-year performance. Warner Bros ( WBD ) added 54%, Shopify ( SHOP ) rose 42%, MercadoLibre ( MELI ) 41%, Carnival Corp ( CCL ) 35%, and Paramount Global ( PARA ) gained 35% from last year. Corporate earnings are drawing investor attention and inflows after oil producer Chevron posted its second-biggest annual profit on record at $36.5 billion.
More importantly, Apple ( AAPL ) expects to generate $96 billion in profits for 2022, far surpassing the $67.4 billion profit reported by Microsoft ( MSFT ). Strong earnings help validate current stock valuations, but they don’t necessarily guarantee a bright future for the economy.
According to Julian Emanuel, senior managing director at Evercore ISI, a more favorable scenario for risk assets came from a decline in key economic indicators, including surveys of homebuilders, trucking surveys and purchasing managers’ index data. contracted (PMI).
According to research by financial services firm Matrixport, US institutional investors represent about 85% of recent buying activity. This means that the big players are not “abandoning cryptos”. The study considers returns during US trading hours, but predicts the performance of altcoins relative to Bitcoin.
On one hand, Bitcoin bulls have reason to celebrate as its price recovered 49% from $15,500 on November 21, but bears still have the upper hand on a larger time frame as BTC is down 39% in 12 months .
Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in current market conditions.
Asia-based stablecoin demand reaches FOMO zone
The premium is a good measure of demand for the China-based crypto retailer. It measures the difference between China-based peer-to-peer trading and the US dollar.
Heavy buying demand pushes the index to more than 100% of fair value, and in free markets, the stablecoin market supply flows, causing a discount of 4% or more.
Currently, the USDC premium stands at 3.7%, down from a 1% discount two weeks ago, indicating stronger demand for stablecoin purchases in Asia. The index reversed course after a 9% rise on January 21, driven by strong demand from sellers.
However, you need to dive into the BTC futures market to understand how professional traders position themselves.
The future premium has been neutral since January 21
Retailers typically avoid quarterly futures contracts, their price difference from the spot markets. Meanwhile, professional traders prefer these instruments because they avoid fluctuating fund rates in a permanent futures contract.
Three-month forward annuities should trade at +4% to +8% in healthy markets to cover the costs and risks associated with them. Thus, when futures trade below such a range, it indicates a lack of confidence from leveraged buyers—usually, a bearish indicator.
Bitcoin futures are showing positive momentum as the underlying index breached the 4% mark on January 21 – a five-month high. This move represents a sharp reversal from the bearish sentiment presented by the futures decline (traverse) that lasts until the end of 2022.
Related: Bitcoin Price Rises, But BTC Mining Shares May Be Vulnerable Throughout 2023
Traders are waiting to see if the federations plan to broadcast
While Bitcoin’s 40.5% return in 2023 looks promising, the tech-heavy Nasdaq’s 10% gain over the same period raises doubts. For example, the Street consensus is a move away from the Federal Reserve moving to raise interest rates at some point in 2023.
Bitcoin derivatives and demand for the stablecoin have moved away from alarming levels, but if the expected soft Fed tapering occurs, the risk of a recessionary environment will limit stock market performance and undermine the appeal of the “inflation hedge” of Bitcoin.
At the moment, the odds are in favor of the bulls, as the main economic indicators point to a correction