Bitcoin Sees a Dip, Yet Pro Traders Remain Cautious About Rallying Past $92K

Bitcoin Sees a Dip, Yet Pro Traders Remain Cautious About Rallying Past $92K

Summary:
Bitcoin is experiencing challenges, with professional traders showing skepticism towards a potential rally above $92,000 amidst economic uncertainties, a delayed jobs report, and a struggling housing market. This sentiment leads to increased costs for traders looking to protect against downturns, while in China, there’s a trend of selling stablecoins at a discount.

Key Takeaways:

Economic uncertainties and a postponed jobs report are driving traders away from Bitcoin.
Pro traders are facing high costs to safeguard against potential price drops, with stablecoins in China trading at lower rates as traders look to exit the crypto market.

Bitcoin recently encountered a $2,650 pullback after it was unable to surpass the $92,250 mark on Monday. This drop followed a reversal in the US stock market, which has been marked by uncertainty regarding job market conditions and growing concerns over inflated valuations in artificial intelligence investments. Traders are now closely watching the US Federal Reserve's monetary policy decision scheduled for Wednesday, with the potential for Bitcoin to rebound to $100,000 hinging on how risk is perceived in the current market.

Bitcoin 3-month futures annualized basis rate. Source: Laevitas.ch

The Bitcoin monthly futures premium compared to spot prices (known as the basis rate) has remained under the neutral threshold of 5% for the last two weeks. This indicates weak demand for bullish leverage and reflects Bitcoin’s 28% decline since its all-time high reached in October. Additionally, growing worries about global economic growth have affected market sentiment.

The official US government data on employment and inflation was delayed due to a 43-day funding shutdown, hindering visibility into current economic conditions. Consequently, the consensus regarding a 0.25% interest rate cut in December has not generated sufficient optimism, especially following a private jobs report indicating over 71,000 layoffs in November.

Further strain has come from the US housing market, with Redfin reporting a 15% cancellation rate of home purchase agreements in October, attributing it to high housing costs and increasing economic uncertainty. Moreover, a report from CNBC noted a 38% rise in delistings since October 2024, and the median listing price in November fell by 0.4% year-over-year.

Bitcoin Underperforms Compared to Stock Market, Reflecting Risk Aversion

Bitcoin’s decline to $90,000 accelerated after the forceful liquidation of $92 million in bullish leveraged BTC futures. While a weak macroeconomic outlook may have dampened Bitcoin traders’ confidence, the S&P 500 index remains just 1.2% shy of its all-time high of 6,920.

Bitcoin 30-day options skew (put-call) at Deribit. Source: Laevitas.ch

Market makers and large investors, often called whales, are demanding a 13% premium to sell Bitcoin put options on Deribit. This inflated cost for downside protection is characteristic of bearish market conditions. Nonetheless, the failed attempt to breach $92,000 on Monday did not significantly alter traders' positioning, reinforcing support around the $90,000 level.

In China, traders are increasingly withdrawing from the cryptocurrency market, with stablecoins trading below their expected value relative to the local currency. This behavior indicates a risk-averse stance and suggests a short-term bearish outlook for Bitcoin, though it does not definitively predict a drop to $85,000 or lower.

Tether (USDT/CNY) vs. US dollar/CNY. Source: OKX

In neutral conditions, USDT generally trades at a 0.2% to 1% premium compared to the official USD rate to account for cross-border friction, regulatory issues, and associated fees. A trading discount relative to the official rate signals significant demand to exit cryptocurrency markets, a pattern frequently observed during bearish market phases.

The lack of inbound flows into US spot Bitcoin exchange-traded funds (ETFs) in recent weeks has further impacted demand for bullish positions. Bitcoin's ability to reach the $100,000 milestone in the near future is significantly dependent on improvements in the US job market and housing conditions, which may take longer to stabilize than a single Federal Reserve announcement.

Related: Bitcoin Buries the Tulip Myth After 17 Years of Proven Resilience, Says ETF Expert.