Key Takeaways:
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Economic uncertainty, a delayed jobs report and weakness in the true estate market are causing traders to tug away from Bitcoin.
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Professional traders are incurring high costs to guard themselves from Bitcoin price drops, while in China stablecoins are being sold at a reduction to exit the crypto market.
Bitcoin (BTC) witnessed a decline of $2,650 after failing to interrupt $92,250 on Monday. The move followed a turnaround within the U.S. stock market amid uncertainty over labor market conditions and growing concern over stretched valuations of artificial intelligence investments.
Traders at the moment are awaiting the US Federal Reserve's (Fed) monetary policy decision on Wednesday, but the probabilities of a fast recovery to $100,000 depend upon risk perception.
Annual base rate of interest for 3-month futures of Bitcoin. Source: Laevitas.ch
The monthly Bitcoin futures premium in comparison with spot prices (base rate) has remained below the neutral threshold of 5% over the past two weeks. The weak demand for bullish leverage reflects Bitcoin's 28% decline since its all-time high in October. Nevertheless, concerns about global economic growth also influenced sentiment.
Official U.S. government data on employment and inflation was delayed as a consequence of the 43-day funding freeze that led to November, resulting in less transparency on the economic situation. As a result, the consensus for a 0.25% rate cut in December wasn't enough to encourage optimism, especially after a non-public jobs report showed 71,321 layoffs in November.
Additional pressure got here from the U.S. housing market after Redfin data showed that 15% of home purchase contracts were canceled in October citing high housing costs and increasing economic uncertainty. Additionally, CNBC reported that the variety of delistings has increased 38% since October 2024, while the median listing price in November fell 0.4% year-over-year.
Bitcoin underperformed the stock market, indicating risk aversion
Bitcoin's decline to $90,000 accelerated after the violent liquidation of $92 million price of bullish-leveraged BTC futures. The weak macroeconomic outlook could have put pressure on Bitcoin traders' sentiment, yet the S&P 500 index was just 1.2% below its all-time high of 6,920.
Whales and market makers demand a 13% premium for selling Bitcoin put options on Deribit. The excessive cost of downside protection is typical in declining markets. Nevertheless, the rejection at $92,000 on Monday had no impact on traders' positioning and reinforced the $90,000 support level.
Traders have also pulled out of the cryptocurrency market in China as stablecoins trade below parity against the local currency. This risk aversion signal supports a near-term bearish outlook for Bitcoin, but doesn’t necessarily mean that traders expect the value to drop to $85,000 or lower.
Under neutral conditions, USDT should trade at a premium of 0.2% to 1% to the official USD exchange rate to offset cross-border tensions, regulatory hurdles and related fees. A reduction to the official price indicates strong demand to exit cryptocurrency markets, a pattern often seen during bearish periods.
The lack of inflows into Bitcoin exchange-traded funds (ETFs) within the US in recent weeks has also weighed on demand for bullish exposure. Whether Bitcoin can reach $100,000 within the near term will largely depend upon improved visibility of the U.S. job market and housing conditions, which can take longer to develop than a single Fed decision.
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