What’s next for Bitcoin? – Bitcoin Magazine
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In today’s Bitcoin Magazine Pro, we will cover the historically significant 200-week moving average, as well as cover the weekend’s price action and derivatives market movements.
Bitcoin is currently below its 200-week moving average, which has only happened four times throughout the history of bitcoin, and marks significant cyclical bottoms, but none has happened during the unique economic situation we are in today. Although today and last weekend will probably look like the best accumulation opportunities in five years, it is difficult to conclude that the worst is over, and that it is only up here, with potentially more cryptocurrency-native contagion and macro headwinds ahead. Regardless of the ugly macroeconomic backdrop (which the market has undoubtedly priced in over the past six months), a simple look at the 200-week moving average to build a bitcoin accumulation framework has served former market participants extremely well.
Bitcoin’s 200-week moving average
Bitcoin’s price divided by the 200-week moving average gives us Mayer Multiple
One-day percentage change in the price of bitcoin
Derivative Market Shenanigans
Our problems last week were completely focused on the cryptocurrency-native contagion that took place, as there was panic throughout the industry about whether various counterparties were solvent, and whether funds on different platforms were safe for users / depositors.
Read last week’s issues here:
While much of the sales were driven by forced sales due to loans secured by DeFi protocols (or the fear of this), the derivatives market on centralized exchanges also deserves a closer look, as it still plays an important role in the movement to the short / medium market. term.
As prices fell below $ 20,000 for bitcoin and $ 1,000 for ether, the perpetual swap futures exploded, and funding rates plummeted.
Bitcoin time futures open interest
Bitcoin time futures open interest
Bitcoin price weighted by the hourly perps financing rate and the hourly financing rate
In layman’s terms, this means that as markets fell, derivatives traders pushed prices lower with an increasing amount of borrowed capital, with negative financing rates showing that perpetual futures contracts led the way down.
When the price reached the middle of $ 17,000 and found a bid, late shorts found themselves offside, forcing buyers higher as the market quickly turned around and flew back to the $ 20,000 level before the weekend was over. There is no free lunch in the market, and the bitcoin market has a way of punishing all undisciplined / over-leveraged market participants through its infamous volatility. These derivative market data lead us to the conclusion that the rise back to $ 20,000 more was a function of shorts coverage.
It should be noted that one of the clear signs of a bitcoin bottom is a strongly short-circuited market, and comparing the derivatives market data with previous years shows that that period may soon be upon us.
Bitcoin price weighted by the hourly perps financing rate
A strong short-circuited bitcoin derivatives market is a market that is ready to fly higher, and although we saw a strong reversal above $ 20,000 due to a squeeze on short positions over the weekend, the worst may not have come yet.
Persistent periods of negative financing for perpetual futures and backwardation (futures price below spot price) are two of the biggest signs of a market that is ready for reversal to the upside.
While short positioning has been more frequent and more severe in recent days than it has been in the last six months, deeper levels of negative financing over long periods of time are what you should look for during a true market cycle bottom (when analyzing previous low cycle).
