After Bitcoin (BTC’s price fell to $47,000 support and altcoin prices plummeted by as much 25% in a matter of minutes, Dec. 13 will be remembered as “bloody Monday”.
Analysts quickly concluded that Bitcoin’s 8.5% correction occurred because of the Federal Open Market Committee meeting (FOMC), which begins on Dec. 15.
Investors fear that the Federal Reserve may eventually begin to taper, which is simply a reduction in the Federal Reserve’s bond-repurchasing program. A revision to the current monetary policy could negatively impact riskier assets, according to logic. Although it’s impossible to prove such a hypothesis is Bitcoin saw a 67% increase in year-to-date gains until December 12. It makes sense for investors that they take the profits before market uncertainty, which could be linked to the current correction in BTC price.
Dec. 13: Top Cryptos Weekly Performance Source: Nomics
The Bitcoin price has retraced 8.2% in the last week. However, it outperformed the wider altcoin market. This is in sharp contrast to the past 50 days when the dominant cryptocurrency’s market share (dominance), dropped from 47.5% down to 42%. Due to Bitcoin’s lower risk than other altcoins, investors could have fled to Bitcoin.
Tether’s Discount bottomed out at 4%
The OKEx Tether discount (USDT) measures the difference in the official U.S. currency and China-based peer to peer (P2P), trades. A figure above 100% indicates a high demand for cryptocurrency investment. A 5% discount is usually indicative of heavy selling.
OKEx USDT peer-to-peer premium vs. USD. Source: OKEx
Tether’s indicator dropped to 96% on December 13, which is somewhat bearish, but not alarming considering the 10% drop in total cryptocurrency market capitalization. It has been more than two months since the Tether indicator surpassed 100%. This indicates that there is not much excitement from China-based traders.
Further evidence that the Dec. 13 price collapse did not affect investor sentiment is the $400 million total liquidations in 24 hours.
Total derivatives exchange liquidations on Dec. 13. Source: Coinglass.com
Moreover, 300 million of the long-term leverage contracts were forced to be terminated because there was not enough margin. This is a small number compared to the $2.1 billion in leveraged buyers who had their positions closed after the Dec. 3, crash.
At the moment, there isn’t a lot of demand from Bitcoin bears
The perpetual futures can be used to prove that the market structure of crypto was not affected by the price drop. These contracts are usually charged a fee for every eight hours to offset the exchange’s risk.
Positive funding rates indicate that buyers (longs) demand more leverage. The opposite happens when shorts (sellers), require more leverage. This causes the funding rate turn negative.
Bitcoin perpetual futures 8 hour funding rate Source: Coinglass
The overall market structure was stable despite the fact that many cryptocurrencies experienced significant losses on December 13. If there had been a lot of short sellers betting that Bitcoin would drop below $46,000 the eight-hour funding for perpetual futures would have fallen below 0.05%.
Tether trading at a discount of 4% in China-based markets, $300,000,000 in long contract liquidations, and a neutral funding rates is not a sign that there is a bear market. These fundamentals are not likely to change, so there’s no reason for Bitcoin prices to drop below $42,000.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.