The likelihood of a Bitcoin price correction descending to $22,000 is growing, driven by emerging bearish signals within BTC derivatives.
Examining the Bitcoin price chart underscores a decline in investor sentiment, attributed to Grayscale’s legal triumph against the SEC on August 29 and subsequent delays in spot BTC exchange-traded fund (ETF) applications.
Crucially, the question at hand is whether the potential for an ETF can outweigh escalating risks.
By August 18, the entire 19% post-BlackRock ETF filing rally had reversed, with Bitcoin regressing to $26,000.
Efforts to reclaim the $28,000 support faltered as optimism for an ETF approval rose following Grayscale’s favorable Bitcoin trust request.
Cryptocurrency investor morale waned as the S&P 500 closed at 4,515 on September 1, only 6.3% below its January 2022 peak.
Similarly, gold, unable to surpass $2,000 since mid-May, sits 6.5% from its all-time high, dampening Bitcoin investor sentiment months ahead of the 2024 halving.
Analysts attribute Bitcoin’s lackluster performance to regulatory actions against Binance and Coinbase, alongside speculation of a potential U.S. Department of Justice indictment against Binance for money laundering and sanctions breaches.
According to Pentoshi, potential gains from a spot ETF approval eclipse the price impact of regulatory actions against exchanges.
Yet, this analysis disregards decreased U.S. inflation (3.2% in July 2023 from 9.1% in June 2022) and the Federal Reserve’s liquidity reduction, unfavorable to Bitcoin’s inflation protection thesis.
Though Bitcoin clings to $25,000 since mid-March, derivatives data suggests testing bulls’ conviction.
Typically, Bitcoin monthly futures trade slightly above spot markets, indicating sellers demand more to delay settlement.
Presently, a 3.5% futures premium is the lowest since mid-June, pre-BlackRock’s ETF filing, revealing reduced demand for leverage buyers via derivatives.
Options markets also offer insights into investor optimism post-correction.
A bearish tone emerges, with protective put options trading at a 9% premium on September 4, contrasting similar call options.
The increasing bearish momentum in Bitcoin derivatives data, coupled with potential spot ETF approval delays until 2024 due to SEC concerns, tips the regulatory landscape in favor of bears.
The looming uncertainty surrounding potential DOJ actions and ongoing SEC lawsuits against exchanges exacerbates the situation.
In conclusion, considering the inability to sustain a positive price momentum despite elevated odds of a spot Bitcoin ETF approval, a retracement to $22,000 appears probable.
This echoes the price level observed when Bitcoin’s futures premium was 3.5%.
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