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In today’s Bitcoin Magazine Pro, we’ll cover the historically important 200-week moving average as well as cover the weekend price action and derivatives market movements.
Bitcoin is currently below its 200-week moving average, which has only happened four times in bitcoin’s history, marking a significant cyclical bottom, but during the unique economic situation we find ourselves in today. None have happened. While today and this past weekend will look like major accumulation opportunities five years from now, it’s hard to conclude that the worst is over and it’s only up from here, with potentially more cryptocurrency-native transitions and macro headwinds. ahead. Despite the ugly macroeconomic background (which the market has undoubtedly been pricing in over the past six months), a simple look at the 200-week moving average to create a framework for bitcoin accumulation has served past market participants very well. has given.
Bitcoin’s 200-Week Moving Average
Dividing the price of bitcoin by the 200-week moving average gives us the Meyer’s multiple.
Percentage change in bitcoin price in one day
derivative market shenanigans
Our issues last week focused entirely on the cryptocurrency-native transition, as industry-wide panic over whether various counterparties were solvent, and whether funds on different platforms were safe for users/depositors.
Read last week’s issue here:
While much of the sell-off was driven by forcibly selling loans collateralized on the DeFi protocol (or fear thereof), the derivatives market on centralized exchanges is also worth a closer look, as it still plays a significant role in the movement. market in the short/medium term.
Perpetual swap futures open interest exploded and funding rates turned sharply negative, as the price fell below $20,000 for bitcoin and $1,000 for ether.
bitcoin hourly futures open interest
bitcoin hourly futures open interest
Bitcoin price weighted by hourly purpose funding rate and hourly funding rate
In layman’s terms, this means that as markets fell, derivatives traders lowered the price with increasing amounts of leveraged capital, with negative funding rates suggesting that perpetual futures contracts were trending downward.
Late shorts found themselves offside as soon as the price reached the mid-$17,000s and bids were found, becoming forced buyers as the market reversed sharply and flew back to the $20,000 level before the weekend was over. There is no free lunch in the market, and there is a way to punish all undisciplined/highly leveraged market participants in the bitcoin market through its notorious volatility. This derivative market data leads us to conclude that the rally to $20,000 was an act of short covering.
It should be noted that one of the telltale signs of a bitcoin bottom is a very short market, and a comparison of derivative market data from previous years suggests that period may be upon us very soon.
Bitcoin price weighted by hourly wallet funding rate
The very short bitcoin derivatives market is one that is set to fly higher, and while we saw a strong reversal above $20,000 due to the squeeze of short positions over the weekend, the worst is yet to come.
Continuing periods of negative funding for perpetual futures and backwardation (futures price below the spot price) are the two biggest signs of a market primed for a market reversal.
While short positioning has been more frequent and severe in recent times than in the previous six months, the deeper level of negative funding during sustained periods is what to look for during a true market cycle bottom (when analyzing past cycle lows).
