Pro Traders in Bitcoin Watch for Potential Breakouts to $92K

Key takeaways:

• Economic instability, a postponed jobs report, and weaknesses in the housing market are prompting traders to move away from Bitcoin.

• Professional traders are facing high costs to hedge against potential Bitcoin price declines, while in China, stablecoins are being sold at lower prices to exit the crypto market.

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

Traders await the US Federal Reserve (Fed) monetary policy announcement on Wednesday, but the likelihood of a swift recovery to $100,000 heavily relies on risk appetite.

The monthly futures premium of Bitcoin relative to spot prices (basis rate) has remained below the neutral 5% threshold for the past two weeks. The lack of demand for bullish leverage reflects Bitcoin’s 28% drop since reaching its all-time high in October. Furthermore, concerns about global economic growth have also affected sentiment.

Delays in official US government data on employment and inflation due to the 43-day funding shutdown that concluded in November have resulted in less clarity regarding economic conditions. Consequently, the consensus around a 0.25% interest rate cut in December has not been sufficient to instill confidence, particularly after reports indicated 71,321 layoffs occurred in November.

Additional pressure emerged from the US real estate market, as Redfin data revealed that 15% of home purchase agreements were cancelled in October, citing high housing costs and increasing economic uncertainty. Moreover, CNBC noted a 38% rise in delistings from October 2024, while the median listing price in November dropped by 0.4% compared to the previous year.

Bitcoin underperformed the stock market, signaling risk-aversion

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

Market makers and whales are demanding a 13% premium to sell Bitcoin put options on Deribit. This increased cost of downside protection is characteristic of bearish markets. Still, the rejection at $92,000 on Monday did not alter traders’ positioning, reinforcing the $90,000 support level.

Traders have also been pulling back from the cryptocurrency market in China as stablecoins have traded below parity with the local currency. This risk-off signal contributes to a short-term bearish outlook for Bitcoin but does not necessarily indicate that traders foresee prices dropping to $85,000 or lower.

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

The absence of inflows into US spot Bitcoin exchange-traded funds (ETFs) over recent weeks has also reduced demand for bullish exposure. Whether Bitcoin can achieve $100,000 in the near future will depend largely on enhanced visibility in the US job market and real estate conditions, which may take longer to materialize than a simple 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.