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2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

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2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

Whenever Bitcoin (BTC) fails to break through important resistance levels, traders gain confidence and add to their altcoin positions. The logic is that, unless BTC drops significatively, these movements historically provide decent rewards for those shifting their portfolios toward higher risk.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

Bitcoin/USD at FTX. Source: TradingView

In the past seven days, the aggregate market capitalization performance of the cryptocurrency market showed a modest 3% increase to $1.78 trillion. This number is roughly in line with the performance seen from Bitcoin, Ether (ETH), and Binance Coin (BNB).

However, comparing the winners and losers among the top-80 coins provides skewed results. For instance, while the gainers captured a positive 24.9% move on average, the worst performers dropped by 5.9%.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

Weekly winners and losers among the top-80 coins. Source: Nomics

Terra (LUNA) rallied 52% on the week after the nonprofit organization supporting the Terra blockchain ecosystem sold $1 billion worth of tokens on Feb. 22. Luna Foundation raised money from Three Arrows Capital and Jump Crypto, a trading group that earlier assisted Solana’s Wormhole cross bridge platform by replenishing their stolen $300 million in Ether.

On Feb. 21, WAVES gained 50.7% after announcing a partnership with Allbridge that makes the protocol cross-chain interoperable and supportive of the Ethereum Virtual Machine (EVM) and non-EVM chains like NEAR Protocol, Solana and Terra.

Arweave (AR) rallied 28.5% in seven days after Bundlr Network released a high-volume Twitter archiver tool on Feb. 21. The system allows users to store tweets and linked media directly onto Arweave’s permanent storage.

Lastly, QuickSwap, the Uniswap (UNI) implementation on the Polygon network, became the largest decentralized exchange DEX protocol by volume, reaching $40 million daily average in February. Uniswap (UNI) token gained 14.4% over the past seven days, while Polygon (MATIC) rallied 8.5%.

The Tether premium reflects low retail demand

The OKX Tether (USDT) premium is a good gauge of China-based retail trader crypto demand. It measures the difference between China-based peer-to-peer trades and the official U.S. dollar currency.

Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, Tether’s market offer is flooded, causing a 4% or higher discount.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

Currently, the Tether premium stands at 100.3%, which is neutral. Still, there has been a consistent improvement in 2022. This data signals that retail demand is picking up, which is positive considering that the total cryptocurrency capitalization dropped 19% between Jan. 1 and Feb. 28.

Futures markets confirm a lack of “euphoria”

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

Accumulated perpetual futures funding rate on Feb. 28. Source: Coinglass

As depicted above, the accumulated 7-day funding rate is slightly negative in most cases. This data indicates slightly higher demand from shorts (sellers), but it is insignificant. For example, Luna’s negative 0.65% weekly rate equals 2.8% per month, a figure which is not too concerning for futures traders.

Had there been a relevant risk appetite from shorts, the rate would be above 1% per week or equivalent to 4.6% per month.

Perpetual futures are retail traders’ preferred derivatives because their price tends to track regular spot markets perfectly. Therefore, despite the negative 19% crypto performance in 2022, the neutral Tether premium and the funding rate should be interpreted as positive.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

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