Bitcoin Set for Price Discovery Following Exhaustion of Excessive Leverage
AI Trading

Bitcoin price is attracting mixed opinions at a time when the price plunged 12.5% to exchange hands at $64,545. The divided opinion coincides with the funding rate reset for the Bitcoin perpetual futures after liquidating the $370M contracts.  

The Bitcoin price suffered downtrend pressure to slip by 12.5% by March 17 since Thursday, March 14 trade. The Bitcoin witnesses increased buying activity when hovering around $65,000. 

Investors are still considering if Bitcoin would surpass the recently set all-time high of $73,755. The situation manifests in mixed opinions despite the resolve witnessed in eliminating the excessive leverage within the future of Bitcoin. 

Wait for the Federal Reserve’s Monetary Policy Meeting

Many investors wait for the US Federal Reserve to conclude its March 20 monetary policy before making a crypto investment decision. The wait is evident despite economists expecting unchanged interest rates. However, the decision is pegged beyond the short-term considerations as they focus on the Fed’s confidence levels in the US economy’s strength. 

AI Trading

The primary uncertainty involves ascertaining when the Federal Reserve will halt reductions witnessed in the $7.5 trillion balance sheet. The expansive monetary policy by the Federal Reserve implies additional money circulating, ultimately benefiting the risk-on assets. 

The analysts consider that the US monetary base currency and reserves influence money circulation beyond the banking system. Increasing the interest rates targets stabilizing and decreasing the figure. 

Higher interest rates diminish the attractiveness of businesses to borrow, thus manifesting the impact of a contractionary economic strategy, thereby controlling inflation. 

Several analysts speculate that sustaining the potential for a Bitcoin bull run in 2024 relies on the Fed ditching the contractionary to deploy the expansive monetary policy. 

The possibility of expansive monetary policy is likely considering inflation declining below 3%, and an economic downturn is expected. This implies that if the Fed retains the elevated interest rates for an extended period, it will result in a decreased Bitcoin surge.  

Bitcoin Futures Join Asian Stablecoin Demand in Signifying Healthy Bounce

Bitcoin investors have recently become uneasy following the excessive leverage owing to the open interest hitting record levels in Bitcoin futures. In particular, the interest rose from $22.2 billion in February to approximately $35.5 billion by March 14. The resulting imbalance witnessed in leverage demand yielded distortions that are barely sustainable. 

Perpetual contracts typically identified as inverse swaps feature a rate recalculated every eight hours. The positive funding rate indicates a rising demand for leverage for those in long positions. 

A market performance review shows that a 0.09% funding rate was attained on March 11, translating to 1.7% weekly. The indicator reduced as bulls suffered 370M liquidations from March 13 to March 15. 

Declined Bitcoin’s Funding Rate

Although the figures appear significant given that Bitcoin’s open interest is estimated at $34.8 billion, it translates to 1% of the entire positions forcibly closed.  

Bitcoin’s funding rate declined to 0.25% weekly by March 15, a level considered neutral in the context of bullish traders. 

The signs confirm the absence of excessive demand within the demand for the short positions. It suggests bears hesitated to place bets against the Bitcoin prices plunging below $65,000. 

Verify whether the decline in demand for leveraged long positions manifests market sentiment mandates by comparing the data with the demand for stablecoins in China. The latter is an essential indicator of the retail investor’s activity in the crypto space. 

The USD Coin USDC premium metric tracks the variance in USDC value relative to the official US dollar rate during peer-to-peer transactions. The USDC premium has in the past week remained above 3% to indicate the stablecoin trading in value exceeding the pegged rate. 

A detailed assessment of the USDC premium shows it has yet to decline below the fair value despite the Bitcoin price correction of around $64,500 witnessed on March 17. 

The trend illustrates the ongoing demand for crypto within China, thereby supporting the uptrend in the Bitcoin funding rate, which now favors long positions. Such demonstrates no signs of a bearish trend and investor apprehension.  

AI Trading produces top quality content for crypto companies. We provide brand exposure for hundreds of companies. All of our clients appreciate our services. If you have any questions you may contact us. Cryptocurrencies and Digital tokens are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by our authors and the views expressed in them do not reflect the views of this website. Herald Sheets is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Read full terms and conditions / disclaimer.

Michael Scott

By Michael Scott

Michael Scott is a skilled and seasoned news writer with a talent for crafting compelling stories. He is known for his attention to detail, clarity of expression, and ability to engage his readers with his writing.

Leave a Reply

Your email address will not be published. Required fields are marked *