After several tests of the key $41500-42000 area, bitcoin confirmed last week's breakout zone as new support and returned above $43K, showing great strength.
The macroeconomic backdrop is decidedly negative, with traditional markets heavily pressured by rising inflation and the winds of war in Eastern Europe.
At the time of writing, the leading cryptocurrency is trading near $44,000.
The Fed's emergency meeting eventually ended in a deadlock interest rates remain unchanged until the next meeting on March 16.
Oil has once again updated its highs and by now 100 dollars a barrel seems only a matter of days, with our president continuing to throw gasoline on the fire of the crisis in Ukraine. Alleged dates of the start of the "Russian invasion of Ukraine" continue to circulate (the latest update indicates D Day for tomorrow, February 16, in what looks more and more like a theater of the absurd, where news vendors and clickbaiters wallow).
Bitcoin has shown good resilience in an extremely complex context, confirming the key area at $41500 and then returning above $43K.Everything seems to be going according to plan, with a consolidation phase underway after last week's breakout.
Barring a rapid deterioration of the international environment, the most likely scenario is that Bitcoin will continue to consolidate in the $42800-45500 trading range, before attempting a new stretch towards resistance in the $46K region.
In case of further jolts in the traditional markets, which will inevitably dampen the momentum of the main cryptocurrency, eyes will be on the $42000-41500 area, which currently represents the key support area of the medium-short term technical structure.
Altcoins are suffering more than Bitcoin, as evidenced by the rising BTC dominance. I reiterate the fact that at this stage, net of some top alts, I do not think it is rewarding to expose too much in altcoins.
Let's now take a look at the usual metrics published yesterday by Glassnode for a brief comment. Glassnode's weekly review today presents us with a situation mirroring what we have seen on traditional exchanges.
The level of uncertainty of investors on the possible economic and political trends of the next months pushes them to accumulate bearish positions in derivatives, while leaving unchanged the liquidity parked long term in the spot market (the real coins).
The situation is the same as in traditional stock exchanges where on the one hand the high yield bond market still contains a lot of long-term parked capital (these are long term "risk-on" positions), on the other hand derivatives host short and medium term "risk-off" capital deployed in an unusually high number of bearish positions (puts).
In the crypto market, long-term risk-on capital is represented by the accumulation of coins by "holders" that remains unchanged despite volatility.
On the contrary, the risk-off capital is present in the derivatives linked to crypto, where the short and medium term bearish positions are accumulated, just as it happens in the traditional exchanges.
Also in crypto then the ambivalent situation (risk-on and risk-off positions open at the same time) denotes the uncertainty about the possible economic and political directions of our world.
The situation then can be described by a few graphs.
live chart
In this chart for example we see the increase of put options (downwards) between January and February.
live chart
In this other chart we see the increase of coins accumulated by holders in the spot market that we have mentioned many times in the past weeks.
For the sake of brevity I do not post the same charts of the past weeks, which always reiterate the same concepts: downward positions in derivatives and simultaneous accumulation of long-term coins of holders with reduction of liquidity in trading platforms.
Instead I add just one more chart below, which caught my attention, because it presents an elegant and synthetic view of what we have said so far.
As you can see, futures expiring through March show a flattening of the price curve (dashed rectangle on the left).
This reflects uncertainty about the impact of a possible rate hike by the Fed, expected that very month.
On the contrary, however, as we can see from the steepening of the curve after March, the further the contracts expire, the higher their prices rise, reaching a 6% increase over the value of the underlying (i.e. the current value of the coins represented by the future) towards the end of 2022.
In a nutshell, the ambiguity between risk-off and risk-on that we have been discussing is reflected in the structure of the futures market itself, with an initial short-to-medium term risk-off phase and a gradual increase in risk-on positions as we approach the second half of 2022.
Thanks for reading, feel free to leave a comment below, it is more than welcome.
Sources
https://insights.glassnode.com/the-week-onchain-week-07-2022/