To date, Bitcoin’s price has fallen 41.72 per cent after hitting an all-time high of $69,000. The lack of significant upward spikes on the cryptocurrency’s chart for several months might suggest that it is supposedly in a bearish trend, that is, in a long-term decline phase.

For example, this is what a daily chart of Bitcoin looks like. It makes it obvious that the situation with cryptocurrencies is completely unclear. There is no clear growth trend or prerequisite for it, and every significant BTC collapse, of which there are at least eight on the chart, hurts the value of alts. The latter usually do not recover in time with Bitcoin’s speed, so investors lose money noticeably.

A daily chart of Bitcoin’s exchange rate

Here, for example, is a daily chart of the Solana SOL exchange rate. Note that the recovery is slower here, with the percentage of SOL losing substantially more than Bitcoin, whose rate reached highs at the beginning of the chart repeatedly.

Solana SOL daily rate chart

However, according to Glassnode analysts, from a fundamental point of view, BTC has most likely already reached the bottom. This means that the market has the prerequisites for growth.

What’s going on with Bitcoin?

Glassnode noted that the decisive pressure on the market at the moment comes from trading volumes in Bitcoin derivatives, rather than spot trading in the cryptocurrency. As a reminder, derivatives are derivatives that give parties to a transaction the right or obligation to perform certain actions on the underlying asset, in this case Bitcoin. Spot transactions, on the other hand, mean simply buying a cryptocurrency at its current price.

BTC futures trading volumes are many times higher than spot trading volumes for coin. This has important implications for current price dynamics, as the volume of futures trading has been declining since January 2021. This has fallen by more than 59% from a high of $80 billion per day in the first half of 2021 to a current volume of $30.7 billion per day.

Bitcoin derivatives trading volumes

Over the same time period, perpetual futures have overtaken traditional calendar futures as the preferred trading instrument because they more closely match the spot price of Bitcoin. Well, the costs associated with delivering BTC are significantly lower than those of commodity futures.

According to Glassnode, “the current volume of open positions in perpetual futures is equivalent to 1.3 per cent of the market value of Bitcoin, which is close to the historically high level” of this index. Despite this, overall capital outflows from calendar expiry futures have led to a decline in the leveraged position ratio, which “suggests that sufficient capital is actually leaving the crypto market.

It is important to understand that futures and other similar instruments allow leveraged trading, which means that trades can be opened with borrowed funds from the exchange. This greatly increases the trader's trading volumes and sort of "speeds up" the market, allowing it to reach much higher heights. And since this activity has now decreased, coins are also in no hurry to show serious price results.

Cryptotrader

According to Cointelegraph, the reason for this capital rotation could be due to the fact that yields from futures fundings in the crypto market, which is traditionally considered one of the best in this regard, are currently barely above the 3 per cent annualised mark. By comparison, the yield on 10-year US bonds is 2.9 per cent.

As a reminder, so-called fundings or funding rates are continuous payments by holders of long positions to holders of short positions or vice versa, depending on market conditions. Read more about the term here.

Annual Bitcoin Funding Yield

Now on to the more positive aspects. Since October 2020, the share of transactions worth more than $10 million in total BTC transfers per day has increased from an average of 10 percent to 40 percent. Analysts believe this indicates a significant increase in the presence of large investors and organisations in the Bitcoin network.

BTC transactions grouped by their value

By comparing readings of aggregate transaction volume combined with the network’s capitalisation-to-transaction ratio, one finds that Bitcoin’s current “fair” value ranges from $32,500 to $36,100. Accordingly, the market may well have bottomed out.

Comparison of Bitcoin fundamentals

In the same chart, the experts considered a potential reversal of the situation – similar indicators have already been observed before the previous local uptrends. That is, if we take into account the Bitcoin network’s fundamentals, a trend change in the cryptocurrency’s behavior should take place in the near future. However, it is important to understand that global economic events or any geopolitical frictions can disrupt any patterns on the chart and lead to further niche declines. So traders and investors still need to use trading tools to protect their own capital.


We believe that the current situation in the cryptocurrency market is not normal, as it and other components of the economy are severely affected by what is happening in the world. Accordingly, without the geopolitical issues and abrupt actions of the Fed, the investment backdrop in the niche would probably be much better. It is a reminder that one cannot predict what will happen in these markets and investors need to be proactive in protecting their capital and be prepared for any scenario.


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