Bitcoin Pro Traders Eye Potential Surge to $92K

Key takeaways:

• Market pressure from economic uncertainty, a postponed jobs report, and a struggling housing sector is prompting traders to move away from Bitcoin.

• Professional traders are facing significant costs for hedging against potential Bitcoin price declines, while in China, stablecoins are being sold below market value as traders exit the crypto space.

Bitcoin (BTC) experienced a drop of $2,650 after failing to surpass $92,250 on Monday. This decline followed a downturn in the US stock market amid uncertainties regarding job market conditions and growing concerns about inflated valuations in AI investments.

Traders are now anticipating the US Federal Reserve’s monetary policy announcement on Wednesday, but a swift rebound to $100,000 hinges on market risk sentiment.

The monthly futures premium for Bitcoin compared to spot prices has consistently stayed below the neutral 5% level for the last two weeks. This lack of demand for bullish leverage reflects Bitcoin’s 28% decline since its peak last October. Concerns regarding global economic growth have also impacted market sentiment.

Delayed official US government figures on employment and inflation, due to a 43-day funding interruption that concluded in November, have led to decreased visibility into economic conditions. Consequently, the expectation of a 0.25% interest rate cut in December has not generated enough optimism, particularly following a private job report indicating 71,321 layoffs in November.

Further pressure has stemmed from the US housing market, with Redfin data revealing that 15% of home purchase agreements were terminated in October due to high housing costs and increased economic uncertainty. Additionally, CNBC noted a 38% rise in delistings from October 2024, while the median list price in November dropped 0.4% compared to the previous year.

Bitcoin underperformed the stock market, signaling risk-aversion

Bitcoin’s decline to $90,000 intensified after the forced liquidation of $92 million in bullish leveraged BTC futures. While the weak macroeconomic outlook may have dampened traders’ sentiment, the S&P 500 index remained only 1.2% below its all-time high of 6,920.

Market participants are requiring a 13% premium to sell Bitcoin put options on Deribit. The elevated cost of downside protection is characteristic of bearish markets. Yet, the rejection at $92,000 on Monday has not deterred traders’ positions, solidifying the $90,000 support level.

Traders in China are also withdrawing from the cryptocurrency market as stablecoins are being traded at a discount compared to the local currency. This risk-averse signal contributes to a bearish short-term outlook for Bitcoin, though it does not indicate expectations for prices to drop to $85,000 or lower.

Under normal circumstances, USDT should trade at a 0.2% to 1% premium to the official USD rate to compensate for cross-border frictions, regulatory issues, and associated fees. A discount compared to the official rate suggests a strong desire to exit cryptocurrency markets, a trend often observed during bearish phases.

The absence of inflows into US spot Bitcoin exchange-traded funds (ETFs) in recent weeks has further diminished demand for bullish exposure. Whether Bitcoin can attain $100,000 in the short term will largely depend on improved clarity in the US labor market and housing conditions, which may require more time to manifest than a single Fed decision.

Related: Bitcoin buries the tulip myth after 17 years of proven resilience says ETF expert

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.