Over the past few days, the crypto markets have been characterized by a very interesting dynamic on futures that allows forecasting the price of Bitcoin.
In particular what is interesting is what has been happening in the futures markets.
Futures liquidations
As highlighted in the latest Bitfinex Alpha report, the Spent Output Profit Ratio (SOPR) showed that Bitcoin sales by short sellers have peaked and appear to have changed direction.
The report goes so far as to suggest that buying BTC at these levels might be prudent.
Not least because instead the Net Unrealized Profit/Loss (NUPL) suggests that the strategy of long-term holders seems to be much less dynamic, as this group of long-time BTC holders now seems to have a good conviction toward the asset.
So while the long-term holders if they sell are often in profit, the short-term holders on the other hand if they sell are often in loss, and this causes an underlying dynamic to be forming that seems to be supporting the price of BTC.
For example, in recent days many traditional exchanges have been falling, while the price of Bitcoin has been rising compared to the early days of September.
In particular, the report points out that last week the spot CVD remained calm, while the futures CVD experienced some upward spikes. This would show that currently long futures positions are protecting the market from further declines.
All of this has meant that the trajectory of the BTC price has seen a slight upward trend this month.
Bitcoin’s price trend and futures forecasting
The latter part of August had been characterized by Bitcoin’s price fluctuating around $26,000, with the exception of the last two days of the month.
By early September, however, the price had fallen below $26,000, and even briefly hiked below $25,000 on Monday the 11th.
At that point, however, a rebound was triggered that brought it briefly even above $27,000, only to fall back below this level again.
After staying around $26,700 for a few days, between Sunday and Monday night it returned to $26,000, but only to rebound fairly quickly and get back to around $26,300.
The interesting dynamic is precisely the one that is actually preventing the price of BTC from falling below $26,000, and indeed trying on several occasions to get close to $27,000 again.
These are very narrow bands of fluctuation, due to the curious balance that has recently formed, with short-term traders selling, and long-term investors buying.
Futures markets also indicate such a situation, with borrowing rates being mostly positive. They indicate long-term appetite on the part of futures traders, but also that futures markets are moving ahead of spot markets.
Macroeconomic issues
In traditional markets, on the other hand, uncertainty remains, partly and mainly because of concerns about economic performance.
In particular, it is still unclear if and when we will be able to get out of the current tunnel of very high interest rates, due to which the economy is starting to suffer a bit.
However, a little bit everyone expects a turnaround that in a few months, with the beginning of a long sequence of small cuts that will bring the situation back to normal.
The hypothesis circulating most is that of a cut in the second half of 2024, that is, after Bitcoin halving.
The comment: futures forecasting and performance
Bitfinex analysts commented saying:
“Over the past week we have been observing a situation where leveraged long positions in the perpetual swap markets have attempted to drive the price higher, but have been unsuccessful due to insufficient spot market buying support. Leveraged long positions without sufficient spot buying can often lead to a vulnerable state, making these positions susceptible to being liquidated or “squeezed out” during market volatility.”
Source: https://en.cryptonomist.ch/2023/09/26/bitcoin-positive-forecasting-futures-market/