The Bitcoin price can not find its footing, but the BTC fundamentals inspire confidence in traders

The sudden crash of Bitcoins (BTC) on January 10th caused the price to trade below $ 40,000 for the first time in 110 days, and this was a wake-up call for traders with mortgages. Long (purchase) futures contracts worth 1.9 billion dollars were liquidated that week, which led to a drop in morale among traders.

The crypto index “Fear and greed”, which ranges from 0 “extreme fear” to 100 “greed” reached 10 January 10, the lowest level it has been since the crash in March 2020. The indicator measures traders’ sentiment by using historical volatility, market momentum, volume, Bitcoin dominance and social media.

As usual, the panic turned out to be a buying opportunity because the total crypto market value rose by 1[ads1]3.5%, going from a bottom of $ 1.85 trillion to $ 2.1 trillion in less than three days.

At the moment, it seems that investors are digesting this week’s economic data, which shows retail sales in the US in December 2021, which fell by 1.9% compared to the previous month.

Investors have reason to worry about stagflation, a scenario in which inflation is accelerating despite a lack of economic growth. But even if this ultimately proves that Bitcoin’s digital scarcity is a positive feature, markets will still seek refuge with the asset that is considered safe. Thus, the first wave will potentially be detrimental to cryptocurrencies.

Top weekly winners and losers January 17 Source: Nomics

The Bitcoin price has been flat over the last seven days, and actually underperformed the altcoin market’s 7% gain. Part of this unusual movement can be explained by layer-1 decentralized application platforms that show a positive performance driven by Fantom (FTM), Cardano (ADA), Near Protocol (NEAR) and Harmony (ONE).

Loopring (LRC), an open zkRollup protocol for decentralized exchanges on Ethereum, presented the worst performance of the week. The DEX volume using the protocol peaked at $ 30 million per day in early December 2021, but is now close to $ 6 million. Meanwhile, Dfinity (ICP) and Chainlink (LINK) are adjusting after a rally of 40% or higher in the first 10 days of 2022.

The tether prize and the futures prize held up well

OKEx Tether (USDT) premium or discount measures the difference between China-based peer-to-peer (P2P) trading and the official US dollar. Figures above 100% indicate excessive demand for investment in cryptocurrency. On the other hand, a 5% discount usually indicates large sales activity.

OKEx USDT peer-to-peer premium vs. USD. Source: OKEx

The Tether indicator bottomed out with a 3% discount on December 31, which is a bit bearish but not alarming. However, this calculation has had a decent 2% discount over the past week, signaling no panic sales from China-based traders.

To further prove that the crypto-market structure has held, traders should analyze CME’s Bitcoin futures contract premium. This calculation analyzes the difference between long-term futures contracts and the current spot price in ordinary markets.

When this indicator fades or becomes negative, there is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.

BTC CME 2-month futures premium vs. Bitcoin / USD. Source: TradingView

These fixed monthly contracts are usually traded at a small premium, indicating that sellers are asking for more money to hold back settlements longer. As a result, futures should be traded at a premium of 0.5% to 2% in healthy markets, a situation known as contango.

Notice how the indicator turned negative on December 9, when Bitcoin traded below $ 49,000, but it still managed to maintain a slightly positive number. This shows that institutional traders show a lack of confidence, even though it is not yet a bearish structure.

Considering that the total market value of cryptocurrency is down 9.5% to date, the market structure remained fairly good. The CME futures premium would have been negative if there had been excessive demand for short sellers.

Unless these basics change significantly, there is not yet enough information available to support calls for a Bitcoin price below $ 40,000.

The views and opinions expressed here are solely those of author and does not necessarily reflect the views of the Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.