Cryptocurrency News

Historically accurate bitcoin metric shows that BTC price has come down


As Bitcoin Price (B T c) Is attempting to establish support at $ 37,000 on Tuesday, the most recent low of $ 30,000, suggesting a derivatives market indicator whose BTC / USD cyclicals are accurate after their bear cycles There is a history of making predictions.

The last time it was predicted was downstream on November 1, after which the cost of buying a bitcoin rose from $ 13,771 to $ 64,899 on Coinbase.

Anatomy of a Bullish Indicator

Dubbed as a “rolling basis”, the indicator mathematically represents the relative difference between the futures contract price and the spot rate over the annual time frame. For example, if a bitcoin contract trades at a 2.5% premium to its spot price on a three-month basis chart, its annual rolling basis becomes 10%.

Finally, assets in futures market trade Either at a discount Or a premium. When the spot rate of an asset is higher than its futures price, it is called backwardness (discount). Conversely, when spot rate futures trade below one – which is typical in traditional financial markets – it represents contango (premium) positions.

The bitcoin futures market fluctuates between backwardness and contango. An extreme contango often indicates a peak in a bull market. Conversely, an extreme backwardness helps to find a potential bottom in a bear market.

For example, in June 2019, the bitcoin futures market on OKEx experienced growth above the 3.5% level. In the same period it peaked at around 6.8%, with bitcoin crossing $ 11,000. However, the BTC / USD spot rate continued to rise until it reached $ 18,000. Subsequently, the pair entered a multi-month bear market, which eventually stood at close to $ 3,100 in December 2019.

Bitcoin futures contango example from June 2019. Source: TradingView

Ben Lilly, a crypto economist at Jarvis Labs, gave readings on the “BTC Futures Anualized Rolling 3 Month Basis” chart against bitcoin spot prices, noting that when the former approaches or closes below 1%, the latter gives it a Takes as indicated. To exit from the bottom and start a new upside down cycle.

The vertical lines denote the day when the bitcoin rollin base reached 0%. Source: Bitmax

The Bitmex chart above shows several such examples when the rolling base reading fell below 1% during the bitcoin’s fall in the spot market. The cryptocurrency later began to experience a rebound rally – a new rapid cycle – with the rolling base slipping below 1% before correcting again to find a new bottom. Wash and repeat.

For example, in March 2020, during the coronavirus-led global market crash, bitcoin futures only recorded a negative 14% shy of growth, which would mark bitcoin’s bottom in the spot market at around $ 3,858.

Bitcoin Futures Rolling Basis till 25 May

Lilly shared a slant chart, showing that BTC Futures’ annual rolling base fell below 1% for the first time since November 2020.

Bitcoin’s rolling basis fell below 1% after the May spot market crash. Source: Skew

“It looks promising in terms of finding a floor,” Noted Lily in her newspaper.

“It baffles back why we use funding rates so high. Because when people think crypto is ending and it’s locked in the wilderness, it bounces back.”

He said that based on just base readings, this is a good time for bitcoin spot traders to accumulate, although noting that this does not mean opening up leveraged long positions in the futures market.

The risk in the derivatives market appeared to be higher due to lack of fast transactions. Lilly said that the selling pressure has not subsided even after the USD 6 billion coin (Usdc) Entered the market – a sign that traders want to use a dollar-pegged fixed currency to buy cryptocurrencies such as bitcoin.

“Right now we are flying in No Man’s Land,” he said.

The statements appeared as bitcoin showed an extreme bias conflict short-term, logging wild intraday price swings in previous sessions. In Monday’s session, the BTC price was knocked down by resistance at the $ 40,000 level.

Currently, the BTC is trying to find support at $ 37,000, which is about 40% below historical highs.