Thursday, October 5, 2023

Crypto Traders Prepare for Rate Hike


Analytics firm Glassnode sees multiple signs that investors are bracing for a storm even as the Fed rate hike in March looms with uncertain results.

Glassnode’s The Week On-Chain newsletter of February 14, the flat futures term structure through March, is the most notable Bitcoin trend. This is mostly due to investor concerns about the larger economic implications of a stronger US dollar.

Spot markets have already taken rate hikes, but the long-term impact is unknown. Because of this, Glassnode has witnessed investors make efforts to protect themselves from rare unfavorable events.

Investors appear to be deleveraging and using derivatives crypto markets to hedge risk and buy downside protection as the Fed raises rates in March.

According to the data, there is no major bullish breakout on the futures term structure curve until the end of 2022. At the moment, the annualized premium on futures is only 6%.

The annualized premium is the amount paid by a buyer for the risk of a futures contract. A larger premium suggests a greater willingness to take risks.

The Analysis

According to Glassnode’s on-chain data analysis, Bitcoin investors hedge risks to avoid a March Fed rate hike.

The gradual but persistent deleveraging through voluntary futures position closures is more indication of a lack of investor confidence. According to Glassnode, this de-risking reduced global futures open interest from 2% to 1.76% of the whole crypto market.

This pattern suggests a desire for safety, conservative leverage, and a cautious approach to approaching storm clouds.

Traditional assets, such as bonds, will face tough times ahead, according to Tom Lee, managing partner at Fundstrat. On Feb. 14, he told CNBC that bondholders would lose money for the next ten years due to rate reversal. That’s about $60 trillion out of a total of $142 trillion.

According to Lee, $60 trillion invested in cryptocurrency will learn investors rates comparable to or greater than bonds.

He believes that a lot of speculative cash from the stock market is more likely. It will have its origins in a bond rotation and will eventually flow into cryptocurrency.

Steady Crypto Money Outflow

Despite market players plainly reducing risk ahead of the Fed rate hike, Bitcoin exchange outflows continue to far outnumber inflows. Net outflows have averaged 42,900 BTC each month over the last three weeks. Bitcoin has been losing value when it hit an all-time high of about $69,000.

Long-term Bitcoin holders (those who haven’t used their Bitcoin in 156 days) control roughly 13.34 million BTC. In support of the latest $33,000 low, long-term holders have only ceded 175,000 BTC since the October 2021 peak.

According to Cointelegraph, Bitcoin is presently trading at $43,552, up 4.19 percent in the last 24 hours.

Rainy Naidoo
Rainy Naidoo
Rainy Naidoo is a writer for Cryptoconstellation. She has her Degree in Journalism and communications. Rainy Likes to spend her free time reading and exploring new places.

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