On October 2, the price of Bitcoin (BTC) saw a 5.5% increase during the day to reach $28,600, but the largest cryptocurrency by market cap lost momentum as the anticipated launch of exchange-traded funds (ETFs) for Ethereum futures failed ( ETH) to achieve success. Generate large trading volumes.
While the recent rise to the upper end of the current price range was likely encouraging for investors, recent comments by US Federal Reserve representatives reiterated concerns about an impending economic downturn.
Bitcoin showed short-term strength by holding support at $27,200 on October 3 and later rising above $27,500 on October 5. However, three key trading metrics point to a lackluster level of support. These metrics include spot and derivatives market volumes and confidence in spot Bitcoin ETF approval.
Macroeconomic forces are putting downward pressure on the price of Bitcoin
On October 2, US Federal Reserve Deputy Chairman for Supervision Michael Barr advertiser He said in New York that he expects economic growth to slow “below its potential” due to high interest rates that are restricting economic activity. He also noted that the full impact of the current monetary policy has not yet been achieved. According to the CME FedWatch tool, the market is currently evenly split on the possibility of the Fed raising interest rates again in 2023.
On October 3, the real yield on 10-year US Treasury bonds, a measure that adjusts for inflation, reached 2.47% – its highest level in nearly 15 years – according to data from the US Treasury Department. This development is partly explained by the US Dollar Index (DXY) reaching its highest point in 10 months.
In addition to Reuters mentioned The United States has become a relatively more attractive investment destination due to its “resilient economy,” which boasts stronger growth prospects compared to Europe and China.
Bitcoin trading metrics show decreasing activity for leveraged trades
Monthly Bitcoin futures typically trade at a slight premium to spot markets, indicating that sellers are demanding more money to delay settlement. As a result, bitcoin futures must typically trade at an annual premium of between 5% and 10% — a situation known as contango, which is not unique to cryptocurrency markets.
The BTC futures premium continues to trade below the neutral 5% threshold, remaining in the neutral to bearish range. This indicates a lack of demand for leveraged long positions.
Additionally, spot trading activity on traditional exchanges has fallen to levels not seen since late 2020, demonstrating reduced institutional investor participation.
It is worth noting that the decline in trading volumes may be attributed to major US-based trading houses, such as Jane Street Group and Jump Trading, distancing themselves from the cryptocurrency markets before May 2023. mentioned The main reason for this shift was “increased regulatory scrutiny,” which made the market less attractive to institutional investors.
Related: Bitcoin price pares its gains in the first week – here’s why
Investors’ expectations for spot BTC ETF are falling
One factor supporting Bitcoin’s 68% gain in 2023 is the expectation that a Bitcoin exchange-traded fund will be approved by the US Securities and Exchange Commission. However, despite multiple postponements by the regulator, the recent launch of Ethereum futures-based ETFs on October 2 saw lackluster demand.
Furthermore, despite a favorable court ruling converting the Grayscale Bitcoin Trust into a spot Bitcoin ETF, it continues to trade at a 19% discount compared to its Bitcoin holdings. This data indicates a lack of confidence in the approval of the spot Bitcoin ETF, as investors will have the option to redeem their shares at nominal value after conversion.
Ultimately, Bitcoin was unable to clear the $28,500 resistance level, and Federal Reserve representatives warned of impending economic pressure. Therefore, the odds of a break above this resistance in the short term look less than favourable.
This article is for general information purposes and is not intended and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.