2 Key Derivatives Metrics Indicate Bitcoin Traders Expect BTC to Hold $40,000

2 Key Derivatives Metrics Indicate Bitcoin Traders Expect BTC to Hold $40,000

Whenever Bitcoin (BTC) fails to break through significant resistance levels, traders gain confidence and strengthen their altcoin positions. The logic is that unless BTC drops significantly, these moves historically offer decent rewards to those who move their portfolios to higher risk.

Bitcoin/USD to FTX. Source: Trading View

Over the past seven days, the overall market capitalization performance of the cryptocurrency market showed a modest increase of 3% to $1.78 trillion. This number roughly matches the performance seen with Bitcoin, Ether (ETH), and BNB.

However, comparing winners and losers among the top 80 coins yields biased results. For example, while the winners recorded a positive movement of 24.9% on average, the underperformers fell by 5.9%.

Weekly winners and losers among the top 80 coins. Source: Nomics

Terra (LUNA) rose 52% the week after the non-profit organization supporting the Terra blockchain ecosystem sold $1 billion worth of tokens on February 22. cross-bridge platform by replenishing their stolen $300 million in Ether.

On February 21, WAVES gained 50.7% after announcing a partnership with Allbridge which makes cross-chain protocol interoperable and supports Ethereum Virtual Machine (EVM) and non-EVM chains like NEAR Protocol, Solana (SOL), and Terra (LUNA).

Arweave (AR) rose 28.5% in seven days after Bundlr Network posted a high volume Twitter archiving tool February 21. The system allows users to store tweets and related media directly on Arweave’s permanent storage.

Finally, QuickSwap, the implementation of Uniswap (UNI) on the Polygon network, became the largest DEX decentralized exchange protocol by volume, reaching a daily average of $40 million in February. The Uniswap (UNI) token has gained 14.4% over the past seven days, while Polygon (MATIC) is up 8.5%.

Tether premium reflects weak retail demand

The OKX Tether (USDT) premium is a good indicator of demand for crypto from China-based retail traders. It measures the difference between peer-to-peer transactions based in China and the official currency of the US dollar.

Excessive buying demand tends to pressure the indicator above the 100% fair value, and during bear markets the market supply of Tether is flooded, resulting in a discount of 4% or more .

Tether (USDT) peer-to-peer against USD/CNY. Source: OKX

Currently, the Tether premium stands at 100.3%, which is neutral. Still, there has been steady improvement in 2022. This data indicates that retail demand is picking up, which is positive given that the cryptocurrency’s total capitalization fell 19% between January 1 and January 28. February.

Futures markets confirm an absence of “euphoria”

Perpetual contracts, also known as reverse swaps, have an embedded rate typically charged every eight hours. Exchanges use these fees to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when the shorts (shorts) require additional leverage, causing the funding rate to become negative.

Accumulated perpetual term funding rate on February 28. Source: Coinglass

As shown above, the 7-day cumulative finance rate is slightly negative in most cases. This data indicates a slightly higher demand from the shorts (sellers), but it is insignificant. For example, Luna’s negative weekly rate of 0.65% is equivalent to 2.8% per month, a figure that is not too much of a concern for futures traders.

Had there been relevant risk appetite in the shorts, the rate would be over 1% per week or equivalent to 4.6% per month.

Perpetual futures contracts are the preferred derivatives of retail traders because their price tends to follow regular spot markets perfectly. Therefore, despite the negative crypto performance of 19% in 2022, the neutral Tether premium and funding rate should be interpreted as positive.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.