Bitcoin faced a 4.9% correction in the four days following its failure to break the $28,000 resistance on October 8th. This correction has raised concerns among investors about the sentiment in the market. However, when looking at the bigger picture, Bitcoin has held up well compared to other traditional assets like gold and Treasury Inflation-Protected bonds (TIP).
Bitcoin has maintained its position at $27,700, outperforming gold, which has fallen by 5% since June, and TIP bonds, which have seen a 4.2% drop during the same period. This resilience in the face of market challenges demonstrates Bitcoin’s strength and potential as an investment.
Despite its impressive performance, some Bitcoin enthusiasts may still feel unsatisfied with its current market capitalization of $520 billion. They may compare it to previous all-time highs of $1.3 trillion in November 2021. However, it’s essential to consider the broader economic context.
The U.S. dollar is currently performing well, as indicated by the DXY index, which measures its strength against other foreign currencies. This suggests that investors have confidence in the resilience of the U.S. economy, which could lead to reduced interest in alternative hedge instruments like Bitcoin.
Another factor to consider is the performance of the S&P 500 index, which has gained 3% since June. While this may seem contradictory to the idea of investors seeking cash positions, it’s important to note that top companies hold significant amounts of cash and equivalents, making stocks an attractive hedge option.
When analyzing Bitcoin derivatives metrics, there are signs of declining demand from bulls. For example, the future contract premium, also known as the basis rate, has reached its lowest level in four months. This indicates reduced appetite for leverage buyers, although it doesn’t necessarily imply bearish expectations.
Additionally, the 25% delta skew in Bitcoin options markets is showing fear among traders. This metric measures the pricing difference between protective put options (sell) and call options (buy). Currently, protective put options are trading at a 13% premium compared to call options, suggesting a negative sentiment towards Bitcoin’s price.
These derivatives metrics are influenced by various factors, including the multiple postponements of the Bitcoin spot ETF decisions by the U.S. Securities and Exchange Commission and concerns about exchanges’ exposure to terrorist organizations.
In conclusion, while Bitcoin has performed well compared to traditional assets and has shown resilience in the face of market challenges, derivatives metrics indicate declining confidence among traders. Factors such as the strength of the U.S. dollar and the performance of the stock market may be contributing to this sentiment. As a result, the likelihood of Bitcoin’s price breaking above $28,000 in the short term appears slim.
