An analysis of online data from Glassnode shows that Bitcoin (BTC) investors are at risk of staying sheltered from the US Federal Reserve’s March rate hike.
Glassnode’s “Week on Chain” fact sheet on Monday notes that the most significant trend in bitcoin at the moment is the flat structure of the March futures contract. This is largely due to “investor uncertainty about the broader economic impact of a stronger US dollar”.
According to Michael van de Poppe, a Cointelegraph contributor, the rate hike is already priced in the spot markets, but the long-term impact is unclear. As a result, Glassnode notes that investors are taking steps to protect themselves from potential downside risks.
“Investors appear to be lending and using the derivatives markets to hedge risk and buy protection from the downside, keeping a close eye on the Fed’s expected rate hike in March.”
While the data clearly shows an objectively flat area on the futures structure curve, it somewhat more subtly hints that investors do not expect a significant upward rally at the end of 2022. The annual premium on futures contracts is now only 6%.
An annuity is the value in excess of $1 a person would pay to risk a future contract. A higher premium indicates a higher risk appetite.
An on-chain analysis of data from Glassnode shows that Bitcoin investors are at risk of staying sheltered from the Fed’s March rate hike.
Another indication of investor mistrust is the slow but steady decline in borrowing due to the voluntary liquidation of futures deals. The removal of risks resulted in what Glassnode sees as a drop in the overall futures interest rates from 2% to 1.76% of the total cryptocurrency market capitalization. This trend indicates a “preference for protection, conservative influence, and a cautious approach to thunderclouds on the horizon”.
Tom Lee, managing partner at Fundstrat, agrees that traditional investments like bonds are having a rough time. On Monday, he told CNBC that because of the change in interest rates, “over the next 10 years, you’re sure to lose money holding bonds…that’s roughly $60 trillion out of $142 trillion.”
However, Lee notes that $60 trillion is likely to go into cryptocurrencies, where investors can continue to reap returns that match or even exceed the returns they received from bonds. He said:
“I think there is likely to be a lot of speculative capital out of stocks… It’s really rooted in bond circulation and eventually moving into crypto.”
The exchange continues
Although market participants clearly cleared the risks ahead of the Fed’s rate hike, bitcoin’s outflows from exchanges still exceeded inflows. Over the past three weeks, the net inflow has reached 42,900 BTC per month. This is the highest outflow since October last year, when the bitcoin price reached a new all-time high of around $69,000 in November.
Long-term bitcoin holders (those who have kept bitcoin in hibernation for at least 156 days) maintain a strong control over the circulating supply, holding around 13.34 million bitcoins. Since the peak in October 2021, long-term holders have given up only 175,000 bitcoins, showing support for the recent drop of $33,000 and demand for more coins.
Related: Bitcoin price consolidates in critical make or break zone as bulls defend $42,000
Bitcoin is currently up 4.19% in the past 24 hours and is trading at $43,552, according to Cointelegraph.