The net flows of linked investment products for Ethereum, Litecoin, Solana, Polygon, Multi-asset, and other cryptocurrencies were almost zero, demonstrating how the recent bear market has been primarily focused on Bitcoin. In terms of regional flows, the US had outflows of around $14 million. "We believe this response demonstrates its sensitivity to the regulatory crackdown in the US, but it also reflects uncertainty among US investors driven by the recent better than expected macro data releases," the statement reads.
Markets are now betting on considerably more Fed tightening this year than they were this time last month due to a spate of significantly stronger-than-expected US data releases this month, including the January jobs and PMI surveys as well as the January CPI and Core PCE inflation figures. The new base case for the market is that rates will hit about 5.5% before the end of H1 this year, according to money market statistics provided by the CME. Markets anticipated that rates would peak around 5.0% a month ago.
Retail investors are not alarmed Financing Rates, however, imply
Bigger scale investors, who use crypto investment products more frequently than individual investors, have evidently become pessimistic due to the escalating macro headwinds, especially in the US. The world's most popular cryptocurrency, though, continues to be resilient, with its price recently changing hands in the mid $23,000 range, still up over 40% for the year, and barely in the black for the month.
According to data on the funding rate for Bitcoin futures provided by the cryptocurrency derivatives analytics website coinglass.com, this could be partially explained by the fact that ordinary investors don't appear to be turning pessimistic. Coinglass.com reports that Bitcoin funding rates are still mostly positive, indicating that traders who want to buy Bitcoin futures are paying more than those who want to sell them.
The markets for Bitcoin options are also indicating that overall skepticism about the biggest cryptocurrency in the world hasn't increased noticeably this month. Indicating that option traders have a net neutral outlook on the market, the 25% Delta Skew of Bitcoin Options expiring in 7, 30, 60, 90, and 180 days all held marginally above zero on Friday.
The choices with a 25% delta The degree to which trading desks are overcharging or undercharging investors for upside or downside protection through the put and call options they are selling to them is measured by something called skew. The right to sell an asset at a certain price is provided by a put option, and the right to purchase an asset at a predetermined price is provided by a call option.
A 25% delta options skew above zero indicates that desks are charging more for call options than puts of equal value. This might be viewed as a bullish indicator since investors are more keen to acquire protection against (or to bet on) a rise in prices. It also suggests that there is a stronger demand for calls than puts.
What Happens to the Bitcoin Price Next?
While not seeming to have a significant impact on the overall market sentiment, the increase in investment into short Bitcoin investment products, according to CoinShares, may be the catalyst for a further short squeeze in the coming weeks and months. The reason that Bitcoin has been remarkably resilient in the face of recent macro headwinds may be due to the fact that, as indicated by numerous on-chain and technical indicators, the cryptocurrency reached an extreme oversold condition in late 2022.
More likely than not, Bitcoin's rebound in 2023 will simply mark a return to the prices at which it should have traded all along (i.e., in the $20Ks rather than the mid-$10Ks). After January's decisive break above the 200-Day Moving Average and "golden cross," the short-term picture for cryptocurrencies is still looking rather positive. Bitcoin also seems to be going upward inside the constraints of an ascending trend channel.
Bitcoin may continue to rise amid hope that the 2022 bear market is over as long as impending US data releases in early March, including as this week's PMI surveys and next week's official jobs data release, don't offer any new hawkish shocks. A breakthrough above $25,000 might pave the way for a move up near $28,000.