Miners are in big trouble due to rising hash rate and energy costs, but professional traders have increased their purchases slightly despite the recent decline in BTC.
Bitcoin
Bitcoin

tick down
$16,836

The price lost 11.3% between December 14 and December 18 after briefly testing the resistance at $18,300.

The move follows a seven-day 8% correction in S&P 500 futures after Federal Reserve Chairman Jerome Powell issued hawkish statements following the Dec. 14 rate hike.

Bitcoin price pulls back towards channel support
Macroeconomic trends have been the main driver of recent moves. For example, the recent rebound from the five-week ascending channel support at $16,400 was attributed to the Central Bank of Japan’s efforts to keep inflation under control.

Bitcoin 12 hour price index, USD. Source: Trading View
The Bank of Japan raised the limit on government bond yields on December 20, which are now trading at levels not seen since 2015.

Not everything has been positive for Bitcoin, however, as miners struggle with a near-record high hash rate and increased energy costs. For example, on Dec. 20, bitcoin miner Greenidge reached an agreement with its creditor to restructure a $74 million debt – although the agreement required the miner to sell almost 50% of its equipment.

Additionally, publicly traded bitcoin mining company Core Scientific reportedly filed for Chapter 11 bankruptcy on December 21. While the company continues to generate positive cash flow, revenue is insufficient to cover operating expenses, which include rent reimbursement for its bitcoin mining equipment.

During these events, Bitcoin held $16,800, so there are buyers at these levels. But let’s look at crypto derivatives data to understand if investors have increased their risk appetite for Bitcoin.

Bitcoin Futures Are Back at Forward
Fixed-month futures typically trade at a slight premium to regular spot markets, as sellers charge more money to hold settlement longer. Technically known as contango, this situation is not exclusive to crypto assets.

In healthy markets, futures should trade at an annualized premium of 4% to 8%, which is enough to offset risk plus the cost of capital.

Annualized 2-month Bitcoin futures premium. Source: Laevitas
It becomes clear that attempts to push the indicator above zero over the past 30 days have completely failed. The lack of a bitcoin futures premium indicates increased demand for bearish bets, and the metric deteriorated from Dec. 14-21.

The current 1.5% discount shows the reluctance of professional traders to add leveraged (bullish) long positions when they are in fact being paid to do so.

The best traders don’t want to give up on their desires
Nevertheless, investors should analyze the long/short ratio to exclude externalities that only impacted the quarterly contract premium.

The metric collects data from the positions of site exchange clients and perpetual contracts and better informs about the positioning of professional traders.

Bitcoin long-short ratio of major traders on the exchanges. Source: coin jar
Although bitcoin briefly traded below $16,300 on December 19, professional traders did not reduce their leveraged long positions according to the long to short indicator. For example, the Huobi trader ratio stabilized at 1.01 between December 16 and December 21.

Similarly, OKX showed a modest increase in its long-short ratio, with the indicator rising from 1.02 to currently 1.04 in five days.

Finally, Binance’s metric rose slightly from 1.05 to 1.07, confirming that traders were not turning lower after testing the ascending channel support.

The strength of the $16,800 support is a bullish indicator
Traders fail to realize that the absence of a futures premium will inevitably lead to bearish price expectations. For example, lack of confidence in exchanges could have deterred potential leveraged buyers.

Related: Pantera CEO on FTX Collapse; The blockchain did not fail

Moreover, the resilience of the long/short ratios of the main traders showed that whales and market makers did not reduce long leverage despite the recent decline in prices.

The main thing was the price

Source: CoinTelegraph

LEAVE A REPLY