Bitcoin fell again by 19 thousand dollars, its fall was after the Jackson Hole comments of the Central Bank.
All markets fell after the US Central Bank’s Jackson Hole economic symposium; with the Nasdaq down almost 4% while Bitcoin was down 6%. According to market analysts, in the last seven days, the leading currency lost more than 12%.
Powell reaffirmed the Federal Reserve’s commitment to curb inflation and said the Fed will continue to raise interest rates at a pace that will cause “some pain” for the US economy.
As for inflation, he said it is still near its highest level in more than 40 years, and the bank will use its tools hard to combat it.
“Fear and Uncertainty” in Bitcoin
Many of the investors who have joined the crypto space in the last few years or so may have heard of the cryptocurrency trading platform Mt. Gox, which was headquartered in the special region of Shibuya in the city of Tokyo, Japan. Launched in 2010, it came to control around 70% of all transactions made with Bitcoin (BTC). This situation, however, changed for the worst in recent times.
Lark Davis, an analyst at The Wealth Mastery, comments on a great FUD (‘fear, uncertainty and doubt’) sentiment: “The entire process of rehabilitating the Mt. Gox funds has been slow and opaque,” Davis comments, “but the fact is that these Bitcoins will start to find their way into the market soon, but little by little. Not all at once.”
FUD sentiment is propelling as a result of the upcoming release of 137,000 Bitcoins released following the resolution of crypto broker Mt. Gox’s bankruptcy litigation.
Current Status
The last time Bitcoin was close to $15,000 was about two years ago. From then on, both the popular digital currency and other crypto assets staged an upward escalation that led Bitcoin to touch $69,000.
However, the Federal Reserve’s restrictive monetary policy to contain inflation has resulted in a sharp decline in cryptocurrencies in recent months.
Some Critical Data to Consider
It is worth noting that as of Sept 02, funding rates for Bitcoin and Ethereum, the top cryptocurrencies by market cap, remain negative for derivatives traders, suggesting a possible short-term bullish signal.
“A negative funding rate indicates that perpetual prices are below the reference price, meaning that short positions pay for long ones,” according to Binance, a major derivatives exchange. In other words, funding rates incentivize traders to buy perpetual futures contracts when the price is lower than an asset’s index price.
In the current market scenario, the abundance of shorts (sellers) in the perpetual market has created an interest in longs (buyers), as the prices of Bitcoin and Ethereum in the futures market are lower than their index prices.
Although there are many shorts in the market, the rising premium has put a demand for longs. This demand could create a bullish scenario in the short term, as traders look to capture value in the perpetual futures market.
As markets continue to battle inflation and interest rate threats, shorts will likely dominate trader sentiment. This will force the premiums to be in favor of the buyers so that the financing rates return to close to zero.
Traders can only hope that market participants are willing to take advantage of the current negative funding rates enough to create a short-term rally in the market. If not, the futures market will likely see a continuation of the trend in funding rates.
By Audy Castaneda
