Bitcoin Professionals Cautiously Watch for Breakouts Toward $92K

Essential Insights:

• Market uncertainties, a postponed employment report, and declining housing metrics are prompting investors to distance themselves from Bitcoin.

• Professional traders face steep costs for protecting against Bitcoin price declines, and in China, stablecoins are being sold at reduced rates as participants exit the crypto market.

Bitcoin (BTC) experienced a decline of $2,650 after failing to exceed $92,250 on Monday. This drop coincided with a downturn in the US stock market, driven by uncertainties surrounding the job market and increasing concerns over inflated valuations in AI investments.

Traders are now anticipating the US Federal Reserve’s (Fed) monetary policy announcement on Wednesday, but a rapid recovery to $100,000 will rely on risk sentiment.

The monthly futures premium for Bitcoin compared to spot prices (basis rate) has remained below the neutral 5% mark for the past two weeks. The limited interest in bullish leverage reflects Bitcoin’s 28% drop since its peak last October, compounded by worries over global economic growth impacting sentiment.

The delay in official US government employment and inflation reports, due to a 43-day funding hiatus that ended in November, has caused diminished clarity regarding economic conditions. Consequently, the expectation of a 0.25% interest rate reduction in December has failed to generate enthusiasm, particularly following a private job report revealing 71,321 layoffs in November.

Additional strain emerged from the US housing market as Redfin data indicated that 15% of home buying agreements were annulled in October, attributed to high housing costs and increasing economic uncertainty. Moreover, CNBC noted a 38% rise in delistings since October 2024, with the median list price falling by 0.4% year-over-year in November.

Bitcoin’s performance lagged behind the stock market, indicating risk aversion

Bitcoin’s decline to $90,000 accelerated after $92 million in bullish leveraged BTC futures were liquidated. Although the somber macroeconomic outlook might have affected Bitcoin traders’ sentiment, the S&P 500 index remains only 1.2% shy of its 6,920 record high.

Market participants are seeking a 13% premium to sell Bitcoin put options on Deribit. The heightened costs of downside protection are characteristic of bearish markets. Nevertheless, the rejection at $92,000 on Monday did not sway traders’ positions, solidifying the $90,000 support level.

Traders are also pulling back from the cryptocurrency market in China, as stablecoins have been trading below parity with the local currency. This risk-averse signal contributes to a short-term bearish outlook for Bitcoin, although it doesn’t necessarily suggest expectations of prices plummeting to $85,000 or below.

In a stable environment, USDT typically trades at a 0.2% to 1% premium compared to the official USD rate, serving to mitigate cross-border issues, regulatory challenges, and related fees. A discount relative to the official rate indicates robust demand to exit the cryptocurrency markets, a trend frequently observed during bearish periods.

The absence of inflows into US spot Bitcoin exchange-traded funds (ETFs) in recent weeks has also dampened the demand for bullish exposure. Whether Bitcoin can achieve the $100,000 mark in the near future will largely hinge on improved clarity concerning the US job market and real estate conditions, which may take more time to develop than a singular Fed decision.

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

This article serves general informational purposes and is not intended as legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.