Bitcoin investors reduced leverage and hedged by buying put options in anticipation of the Fed’s March meeting. This is the conclusion reached by Glassnode analysts.
Amidst macro headwinds, #Bitcoin investors have opted to close out leverage, buy put option insurance, and de-risk ahead of Fed rate hikes expected in March.
We also analyse whale, miner and investor on-chain supply dynamics.
Read The Week Onchain👇https://t.co/CUrpfv8uds
— glassnode (@glassnode) February 14, 2022
According to the on-chain indicators, the market is in balance and shows no signs of fear or panic. Miner and whale balances remain unchanged.
Unlike previous cycles, market participants prefer reducing risk via derivatives rather than selling on the spot market. Glassnode sees this as the market maturing, characterised by rising liquidity and the emergence of more sophisticated risk-management tools.
The futures curve ahead of March 2022 took on a flatter shape. In the period to December, the premium stood at a ‘modest’ 6% on an annualised basis. This suggests there is no expectation of a wild bullish impulse.
Open interest (OI) on Bitcoin futures declined to below 1.75% of total market capitalization. The last time such low leverage values were observed was from December 4 to 21.
Analysts emphasised that the decline occurred not due to liquidations but due to investors’ reluctance to take on risk amid macroeconomic uncertainty.
On the market for Bitcoin options, investors shifted focus to buying puts with strikes from $38,000 to $40,000. Open interest for them was more than 2.5 times the level of calls at the most popular strike prices between $48,000 and $50,000. The put-to-call ratio has been rising since January.
In contrast to the typical rise in exchange balances seen during risk-off periods (for example, May–July 2021), there is currently a net outflow of coins from centralized platforms. Its monthly pace has accelerated, reaching about 42,900 BTC.
7.2% of the 18.85% of the total market supply attributed to short-term holders (coins held for less than 155 days) returned to profitability. This happened as Bitcoin’s price moved back above $44,000.
In other words, over the past three weeks roughly 1.78 million BTC have changed hands in the $33,500–$44,000 range. This points to underlying demand, according to the analysts.
As JPMorgan analysts estimated the fair value of digital gold at $38,000.
Earlier a bank poll showed that more than 40% of clients expect Bitcoin to reach $60,000 by the end of 2022 and only 5% believe the price will reach $100,000.
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