PMI

Bitcoin futures open interest at 2023 high while BTC trading volume at yearly low — What gives?

August 11, 2023 Coin Telegraph

Binance

BTC futures open interest is on the rise, but Bitcoin trading volume suggests that traders have shifted their attention to other markets.

Bitcoin (BTC) traders are currently not pleased with the recent price trends, especially due to the inability of its price to surpass the $30,500 mark over the last four weeks. This frustration is compounded by the fact that several requests for spot Bitcoin exchange-traded funds (ETFs) are either being delayed or pending review from regulators.

Interestingly, there has been a noticeable uptick in the open interest of Bitcoin's futures contracts, which likely indicates increased demand from institutional traders. On the other hand, activity in the derivatives markets has been lackluster. This contrast in market dynamics has led to a mixed sentiment among investors, making it challenging to gather enough momentum for trading at or above the $31,000 level.

*Bitcoin 1-day price index, USD. Source:* *TradingView*

The main factor cited by many analysts for the lack of buyers driving Bitcoin above the $30,000 mark is the reports surrounding the United States Department of Justice considering fraud charges against Binance. Additionally, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) currently have their own legal actions against the exchange and its founder, Changpeng “CZ” Zhao.

Macroeconomic forces partially explain Bitcoin investors’ discomfort

Taking a broader view of the situation, there is an added concern regarding the potential global economic recession triggered by the efforts of central banks to control inflation. The most recent U.S. core Consumer Price Inflation (CPI) figures, which exclude food and gas prices, saw a 4.7% rise compared to the previous year, following a 4.6% increase in June. This data supports the ongoing initiatives to tighten the economy, favoring investments in fixed income, short-term bonds and cash positions.

As a result, despite the consensus projecting the Federal Reserve to maintain the interest rate cap at 5.5% during the upcoming September meeting, investors lack the motivation to increase their positions in risk-on markets. This reluctance stems from the growing likelihood of a recession, evident through the 1.4% decline in Eurozone retail sales year-over-year in June and the U.S. ISM Manufacturing PMI registering at 46.4 in July, which indicates a state of contraction.

When examining the price as an indicator, it becomes apparent that Bitcoin investors are currently not displaying significant confidence in the likelihood of a near-term approval for a spot ETF. At the same time, there is a notable sense of pessimism surrounding the ongoing legal challenges faced by Binance and the potential repercussions of these challenges. Irrespective of the specific reason, the overall trend of Bitcoin's price over the past 50 days has been predominantly negative, with frequent visits near the $29,000 support level.

Bitcoin derivatives are extremely important for price guidance

The Bitcoin futures market holds immense importance within the trading landscape. This market encompasses cryptocurrency-exclusive derivatives exchanges like Binance, Bybit, and OKX, as well as established traditional financial platforms such as the Chicago CME exchange. In essence, futures contracts are financial agreements between two parties, wherein actual BTC doesn't change hands. However, the appeal of leverage enables this market to surpass the trading volumes typically seen in regular buying and selling.

*Bitcoin futures aggregate open interest, USD. Source: Coinglass*

According to data from Coinglass, on August 8, trading activity within this market surged to approximately $14.5 billion, approaching levels reminiscent of those observed back in May 2022. It could be argued that these contracts are continuously balanced between buyers (longs) and sellers (shorts). However, the expansion of this market allows larger-scale investors to participate and attracts traders employing various strategies, including "cash and carry" approaches and miners seeking risk mitigation.

Nevertheless, the growing number of active contracts, as evident from open interest, does not necessarily equate to increased trading activity within the futures market. In reality, the volume associated with Bitcoin futures has experienced a downward trajectory over the past seven months.

*Bitcoin futures aggregate volume, USD. Source: Coinalyze.net*

Recent data points out that trading volumes for BTC futures have dropped to their lowest levels since December 2022, averaging below $7 billion per day. This suggests that traders are either fully protected against risks and not inclined to make further moves at the current price levels, or they have shifted their focus to other markets with higher volatility or better odds of significant changes.

The situation boils down to this: until there's some clear confirmation about the ETF decision and more defined rules about exchanges like Binance and Coinbase due to their clashes with regulators, traders using Bitcoin derivatives don't seem to have much motivation to make more trades. These significant events, combined with the uncertainty in the broader economy, provide an explanation for the reduced trading activities, even though more people are keeping an eye on the situation and the price is stuck around $29,500.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Where’s the recession? These 3 economic indicators can alert investors to a market downturn

July 31, 2023 Coin Telegraph

Coin Telegraph

Analysts have called for a U.S. recession all year, but stocks continue to creep higher. Here are three metrics investors can watch to know if an economic downturn is coming.

Inflation came down a lot faster than most investors and analysts anticipated, reaching 3% in June. The recession that most analysts predicted is nowhere to be seen, according to the 3.6% unemployment rate nearing a 50-year low and the S&P 500 Index showing a 19% gain year-to-date.

While the current market performance may lead investors to believe that a recession has been avoided, there are three metrics that have been able to consistently predict recessions over time. These leading economic indicators are key economic variables that tend to move ahead of changes in overall economic activity, providing an early warning system for changes in the business cycle. Let’s dig into three of these indicators and explain how investors can interpret them.

Yield curve inversion

The yield curve represents the relationship between short-term and long-term interest rates on government bonds. Normally, long-term bonds have higher yields than short-term bonds to compensate investors for the risk of holding their money for a more extended period.

Historically, an inverted yield curve has often preceded recessions. This indicator suggests that investors are worried about the near future and expect interest rates to fall due to a potential economic slowdown.

*U.S. 10-year yield spread vs. 2-year. Source: TradingView*

The two-year Treasury yield is currently 3.25%, while the 10-year Treasury yield is 2.95%, typical of periods ahead of a recession. However, that has been the case since September 2022, and historically there’s a nine- to 24-month lag before the economic contraction takes place.

Leading economic indicators (LEI)

The Conference Board, a nonprofit research organization, compiles a set of economic indicators known as the leading economic indicators (LEI). These indicators include a variety of data points, such as building permits, stock prices, consumer expectations, average weekly hours worked and more.

*U.S. consumer confidence index. Source: The Conference Board*

When these indicators start to decline or show a pattern of negative movement, it can signal an impending recession. The consumer confidence index for July hit a reading of 117, the highest level in two years. Moreover, according to The Conference Board, the probability of a recession in the next six months is 25%, down from 30% in June.

Purchasing managers’ index (PMI)

The purchasing managers’ index (PMI) is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A PMI of more than 50 represents an expansion, while readings under 50 represent a contraction. The PMI is seen as a very reliable tool, as it provides timely and accurate data on the manufacturing sector.

The S&P Global U.S. Manufacturing PMI fell to 46.0 in July 2023, down from 46.9 in June and 48.4 in May. This is the lowest reading since December 2022, and it indicates that the manufacturing sector is in a state of contraction. In short, the global economy is slowing down, and this is having a negative impact on demand for exports from the United States.

The Federal Reserve is in a tight spot

The U.S. economy is currently presenting mixed signals. Despite a robust consumer demand underpinned by rising wages and low unemployment, industrial growth indicators have remained weak throughout 2023. Moreover, bond markets suggest market reluctance to add risk-on positions.

This hesitancy is due to the Federal Reserve’s anticipated monetary policy tightening and further expected interest rate hikes for 2023. These different signals show the tricky situation for those in charge of the interest rates.

If the Fed tightens policy too much, it could slow down the economy too quickly, possibly leading to a recession. On the other hand, if the Fed is too lenient, it could trigger high inflation, which erodes purchasing power and can destabilize the currency.

For cryptocurrency investors, there’s an additional variable that further complicates the analysis. Despite the long-term high correlation between Bitcoin (BTC) and the stock market, the past eight months have displayed periods of inverse trend, meaning the assets moved in distinct directions.

*S&P 500 futures 50-day correlation vs. Bitcoin/USD index. Source: TradingView*

Amid crypto market uncertainty, the Fed’s decisions are key to revealing economic confidence. Increasing interest rates signifies stability, potentially benefiting cryptocurrency markets in the short term, whereas rate cuts may indicate economic concerns, possibly affecting risk-on markets in general. Therefore, tracking the Fed provides timely investor guidance in uncertain economic times.

Most ‘fear’ in 3 months as $26.4K becomes key — 5 things to know in Bitcoin this week

June 19, 2023 Coin Telegraph

Bitcoin

Bitcoin sentiment is clinging to any optimism it can get — just like BTC price performance — as a new week of volatility triggers begins.

Bitcoin (BTC) emerges from a hectic macro week to circle some classic trend lines near $26,000 — what could happen next?

After some brutal tests of traders’ resolve over the past seven days, the BTC price is still determined to hold familiar ground.

Market participants are in “wait and see” mode as a lack of clear direction characterizes the largest cryptocurrency at the start of a new week’s trading.

United States holidays mean traditional markets will only open on June 20, giving at least one day’s grace before any surprises hit.

There is still plenty left to deal with from last week, however, including BlackRock filing for a Bitcoin spot exchange-traded fund (ETF). Rumors are now that Fidelity Investments might follow.

What will it take to inspire BTC price to adopt a trend? Cointelegraph looks at some of the major topics now under discussion among traders and analysts.

No relief for nervous Bitcoin traders

The latest weekly close for BTC/USD yielded little change over the past seven days.

At just above $26,000, “sideways” is the name of the game for the pair, which weathered a slew of potential volatility triggers over the week.

A trip to new three-month lows was short-lived, however, and traders are now cautiously waiting for new cues on the direction while not yet defaulting to a bearish view.

“I remain long while we show no signs of a reversal,” Crypto Tony said in a summary of his position on the day.

“Looking for that trend line test at $26,900, and following a flip of that we then have $27,300 to note then up and away. Step by step we move.”

Fellow trader Koala argued that upside and downside extremes centered on a $4,000-wide corridor, with lows likely to get swept before a return to $27,000.

“A set of equal highs and equal lows. I think we run the equal lows before the equal highs,” he argued.

“The demand area is where I’m interested in bidding for a run higher (invalidation is quite obvious) If demand holds, then 27k+. Otherwise, 23kish.”

*BTC/USD annotated chart. Source: Koala/Twitter*

For Credible Crypto, the potential range was narrower, with $25,500 the lower boundary.

“It would not surprise me to see us chop around between the RED and GREEN regions below for another few weeks. Any move above 28.5k and we will have broken a key market structure level that would imply that our corrective structure has completed and we may have begun a new impulsive move,” he wrote in part of a recent analysis alongside an explanatory chart.

“A low timeframe move below GREEN is OK, because (as per previous posts), my HTF bias is bullish above 20k. That being said, I would only expect us to dip below GREEN due to some short term, fundamental/event driven volatility. Let's see what the next few weeks bring.”

*BTC/USD annotated chart. Source: Credible Crypto/Twitter*

Trader Pierre flagged two trend lines in the form of the 4-hour and 1-day as support and resistance levels, respectively.

Very elaborate analysis shared yesterday:
- Must hold = H4 trend
- Must break = D1 downtrend (same since +29.0k)
- Chopfest in between https://t.co/pIAFeLgFQ2 pic.twitter.com/h9lhnjKImH
— Pierre - I will never DM you first (@pierre_crypt0) June 19, 2023

BTC price additionally circled the classic 200-week moving average (MA) to start the week, this lying at $26,600, per data from Cointelegraph Markets Pro and TradingView.

*BTC/USD 1-day candle chart on Bitstamp with 200-week MA. Source: TradingView*

Speculators in the spotlight

In terms of where BTC price might fall to should downside momentum return, on-chain analysis offers a clearer vision of support.

For analytics firm Glassnode, recent price action has centered on a key breakeven point for Bitcoin’s more speculative investor cohort.

Dubbed “short-term holders (STHs),” these correspond to wallet entities, which have hodled coins for 155 days or less.

The aggregate cost basis (CB) for these entities — the price at which they purchased coins within that 155-day window — currently sits at $26,400, roughly matching the 200-week MA.

“The recent volatility in Bitcoin price action has been anchored around the Short-Term Holder Cost-Basis of $26.4K,” Glassnode argued in a Twitter post at the weekend.

“This suggests the STH-CB remains a pivotal level in determining both the direction and momentum of the local trend.”

*Bitcoin STH data annotated chart. Source: Glassnode/Twitter*

Below $26,400, then, STHs begin to encounter unrealized losses on their investment, as shown by an accompanying chart.

Glassnode has previously flagged the significance of the STH-CB, this along with the equivalent for 155-day+ investors, known as long-term holders (LTHs), becoming a source of interest in particular after that November 2022 meltdown of exchange FTX.

Macro cools after intense week

With United States markets closed for the Martin Luther King Jr. holiday on June 19, macro catalysts for crypto markets lie in wait later in the week.

While not as numerous or significant as the previous week’s set, these still have the potential to spark some surprise volatility.

The Federal Reserve is among them, with Chair Jerome Powell due to testify before Congress over two days from June 21.

After the Fed’s recent decision to pause interest rate hikes but leave the door open to resume them later, markets will be keenly analyzing Powell’s language for hints as to what might come next.

To cap off the week, June 22 will see the release of Purchasing Managers’ Index (PMI) data.

Among market participants, meanwhile, the focus is equally on Bitcoin’s correlation to traditional risk assets as it is on how macro triggers impact them.

“Not only has $BTC lost the positive correlation w/SPX and NDX, but we've also lost the inverse corr w/DXY,” trader Josh Olszewicz noted last week, reference Bitcoin’s interaction with the S&P 500, Nasdaq and U.S. dollar index, respectively.

Credible Crypto suggested that the recent disparity between BTC and SPX performance — sideways versus what various source have called a “bull market rally” — may yet resolve in bulls’ favor.

Been seeing quite a few comments lately on the "weakness" of $BTC vs trad markets $SPX and how this is bad for crypto.

Don't mistake consolidation for weakness.

Like a student who gets a good nights sleep before a major exam- the more we rest before the big day the better we… pic.twitter.com/FoCrvOskD1
— CrediBULL Crypto (@CredibleCrypto) June 18, 2023

Cointelegraph has often reported on the ups and downs of Bitcoin’s macro correlations in recent years. A notable theme post-2020 has been strength during periods of Fed liquidity injections and vice versa.

GBTC gets a BlackRock boost

Bitcoin itself may be offering little inspiration, but one of its biggest investment vehicles is experiencing a resurgence in its own right.

The Grayscale Bitcoin Trust (GBTC) has begun a fresh attempt at narrowing its heavy discount versus the BTC spot price.

GBTC has traded at this discount — which is in fact a negative premium — since Bitcoin’s all-time highs in 2021. Since then, it has reached -50%.

Last week’s announcement of a Bitcoin spot price exchange-traded fund (ETF) filing by BlackRock appeared to induce a change of mood, and as of June 17, the premium had decreased to -36.6%.

As Cointelegraph reported, the changes came despite arguments over the true status of BlackRock’s offering, with some claiming that it would not be a spot ETF, which remain banned in the U.S., at all.

*GBTC premium vs. asset holdings vs. BTC/USD chart (screenshot). Source: CoinGlass*

That aside, GBTC’s recent performance remains impressive — 36.6% is within striking distance of new 2023 highs for the premium.

Buyers have also been making themselves known, leaving major client ARK Invest to react. ARK currently owns more than 5.3 million GBTC shares.

*ARK Invest GBTC holdings chart (screenshot). Source: Cathie's ARK*

This week, meanwhile, fresh speculation of an ETF offering focuses on asset manager Fidelity Investments, with details still forthcoming.

“I was long GBTC before this but this makes me more confident that it was the correct move,” investor Mike Alfred reacted.

Market optimism sees repeated tests

Crypto market sentiment got spooked last week thanks to the combined ramifications of U.S. legal action against exchanges and macroeconomic policy changes.

A look at the Crypto Fear & Greed Index shows how recent events have left their mark — June 15 saw the lowest score since mid-March.

While this suggests a more “fearful” environment than at any time since then, Fear & Greed nonetheless remains surprisingly stable. Those lows came in at 41/100 — barely “fearful” at all and subsequently returning to the stable “neutral” range.

As of June 19, the Index measures 47/100.

*Crypto Fear & Greed Index (screenshot). Source: Alternative.me*

Continuing, research firm Santiment additionally cited the BlackRock ETF story as potential fuel for markets — specifically because some reactions were hostile.

For Santiment, “the more negativity surrounding this story, the stronger likelihood of a continued rise” in crypto markets, it explained last week.

Magazine: Gary Gensler’s job at risk, BlackRock’s first spot Bitcoin ETF and other news: Hodler’s Digest, June 11–17

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin price eyes $22K as US PMI data hits lowest since May 2020

August 23, 2022 Coin Telegraph

Bitcoin

BTC price bounces and the U.S. dollar falls from fresh twenty-year highs as PMI numbers reignite talk of recession.

Bitcoin (BTC) headed for multi-day highs after the Aug. 23 Wall Street open as United States economic data tripped up the dollar.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

Dollar suffers as data shows incomes "squeezed"

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it eyed $21,700 at the time of writing, near resistance in place since last week’s near-12% drop.

The pair gained momentum as the U.S. Purchasing Managers Index (PMI) prints for August showed a drop versus the month prior, hitting the lowest levels since May 2020 at the height of the first round of COVID-19 lockdowns.

“The S&P Global Flash US Services Business Activity Index posted at 44.1 in August, down from 47.3 in July, to indicate a further reduction in overall services activity,” a press release from curator S&P Global stated.

“The decrease in business activity was sharp overall and the fastest since May 2020. Service providers noted that hikes in interest rates and inflation dampened customer spending as disposable incomes were squeezed.”

Yikes! The US Composite #PMI just fell to 45.0! That is near #recession levels. The Services PMI is down to 44.1, where an increase to 49.8 was expected. pic.twitter.com/GwSKfnOXS3
— jeroen blokland (@jsblokland) August 23, 2022

The implied slowdown in demand caused an immediate knock-on effect for dollar strength, with the U.S. dollar index (DXY) falling from new twenty-year highs.

*U.S. dollar index (DXY) 1-hour candle chart. Source: TradingView*

The inversely-correlated DXY had conversely gained rapidly in the days prior, this coinciding with U.S. stocks facing resistance and Bitcoin seeing multiple trips below $21,000.

“The Aug. PMI Composite Index fell to 45 from 47.7 in July. It was expected to rise to 49.2,” gold proponent Peter Schiff reacted.

“The Services PMI tanked to 44.1, the lowest since May 2020 and Mfg. sank to 51.3, the lowest since July 2020. The U.S. PMI is weaker than any PMI in Europe or Asia.”

*S&P Global Flash US PMI Composite Output Index chart. Source: S&P Global/ Twitter*

The S&P 500 and Nasdaq Composite Index were up a modest 0.25% and 0.45% at the time of writing, respectively

BTC bulls face $21,700 challenge

Analyzing what could be next for risk assets, commentators hoped for a rally in stocks on the back of a declining dollar.

Popular Twitter account Game of Trades called the S&P 500 “extremely oversold in the short-term” based on relative strength index (RSI) data.

“Watch out for all the potential bullish RSI divergences it has picked up along the way,” part of a fresh update read.

On Bitcoin, optimism from some likewise focused on a return to the range highs since June, with a “clean break” above $25,000 being the deal breaker for $28,000 or more to appear.

#Bitcoin / $BTC

Are you ready? pic.twitter.com/dZ0NI1JleS
— K A L E O (@CryptoKaleo) August 23, 2022

For on-chain analytics resource Material Indicators, meanwhile, it was $21,700 that needed to be cracked as a first step.

"If we don't see more BTC bids coming in above $21k, the downside illiquidity (dark areas) will be exploited," it warned alongside a chart of support and resistance levels on the Binance order book.

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

The US Federal Reserve is making some analysts bullish on Bitcoin again

February 3, 2022 Coin Telegraph

ADP

Recent U.S. economic data could spoil the Fed's hawkish plans for 2022.

Signs of a steady Bitcoin (BTC) price recovery emerged earlier this week as investors shifted away from the U.S. dollar on weaker-than-expected economic data.

In detail, Bitcoin's drop last week to below $33,000 met with a healthy buying sentiment that pushed its per token rate to as high as $39,300 on Feb. 1. As of Thursday, BTC's price dipped below $37,000 but was still up 13% from its local bottom.

Meanwhile, the U.S. dollar index (DXY), which measures the greenback's strength against a basket of top foreign currencies, rose to 97.441 last Friday, logging its best level since July 2020. However, the index corrected by nearly 1.50% to over 96.00 by Feb. 3.

*DXY vs. BTC/USD daily price chart. Source: TradingView*

Some market analysts saw the dollar's renewed weakness as a sign of waning rate hike fears.

For instance, Lyn Alden, the founder of Lyn Alden Investment Strategy, tweeted that the Fed "reached a fever height last week in terms of making more and more aggressive tightening scenarios," noting that the central bank may turn dovish as "economic deceleration/weak PMI data takes center stage."

U.S. factory activity, employment drops

Alden cited the U.S. manufacturing growth, which, according to data released on Tuesday, dropped for the third month in a row in Jan. 2022. Notably, the Institute for Supply Management’s gauge of factory activity reached 57.60, its worst level since Nov. 2020, compared to 58.80 a month earlier.

*U.S. manufacturing growth data. Source: ISM, Bloomberg*

Additionally, the ADP Research Institute data released Wednesday also showed cracks in the ongoing U.S. economic recovery, revealing that employment across the regional companies fell by 301,000 in December 2021, the highest since the early days of the Covid-19 pandemic.

The lower-than-anticipated data came a week after the Federal Reserve Chairman Jerome Powell's press conference. He raised speculations about raising interest rates three times in 2022 to tame the rising U.S. inflation.

Powell's hawkish turn pushed the price of Bitcoin down as the U.S. dollar strengthened.

Currently, U.S. rate futures hint at four to five rate hikes in 2022. James Bullard, president of the Fed's St. Louis branch, further stoked the "tightening" fears, stating earlier this week that five rises were "not too bad a bet."

Nonetheless, his hawkish comments coincided with a recovery rally in the Bitcoin market as the dollar pared gains, prompting Alden and other analysts to say that the market may have overreacted to Powell's tightening outlook.

Fed officials now cautiously hawkish

One of the primary catalysts behind the Fed's rate hike plans was a steady recovery in the U.S. jobs market. But with lesser-than-expected ADP readings, the central bank could backtrack on its tightening plans.

"They have moved from nearly all talk and little action to 100% hot air," noted Preston Pysh, the founder of the Pylon Holding Company.

Some Fed officials have also noted that the central bank might not go ahead with rate hikes as aggressively as anticipated.

For instance, Kansas City Fed President Esther George said "unexpected adjustments" would not be in anybody's interest. Similarly, San Francisco Fed chief Mary Daly also cautioned against tightening too quickly.

Fed @ max hawkishness. Dovish from here. Implications for the dollar.
— Teddy Vallee (@TeddyVallee) January 28, 2022

Currently, the CME's Fed Watch Tool predicts a 94.40% possibility of a 25 bps rate hike in March 2022. But whether there would be back-to-back increases for the rest of 2022 remains unclear.

"They will hike, but not as much as the forward curve implies," wrote Teddy Vallee, the founder of Parvelle Global, a New York-based hedge fund, adding:

"Digital asset space pricing in worst case."

As a result, the very narrative that pushed the Bitcoin price to new multi-month lows last week appears to be showing cracks.