What caused the cryptocurrency market to shift from rising to falling?
On October 21, Bitcoin's price dropped to $67,000, erasing the gains of the previous three days. Some analysts suggest that one reason for the pullback is that investors reduced their exposure to Bitcoin due to concerns about the impact on traditional markets. However, the indicators for Bitcoin derivatives remain very stable.
Despite worries that many economies may lose momentum or that confidence in the government's ability to refinance debt is waning, demand for Bitcoin derivatives as a hedging tool remains stable. If whales or arbitrageurs expect further declines, these indicators will reflect greater volatility.
In a neutral market, the Bitcoin futures premium typically ranges between 5% and 10%, only slightly affected on October 21. The rise in monthly BTC futures prices reflects an extension of the settlement period, with a premium exceeding 10% indicating bullish sentiment.
The annualized premium (base rate) for October remains above 9%. On the 21st, Bitcoin retested the support level of $67,000. However, it is important to confirm whether this sentiment is limited to the Bitcoin futures market before drawing conclusions. Based solely on price charts, Bitcoin's price trend appears to reflect the intraday performance of the stock market.
Driven by rising inflation expectations and concerns over government fiscal spending, the yield on the 10-year U.S. Treasury bond is expected to "test the 5% threshold within the next six months." As investors sell bonds, yields rise, indicating that traders are seeking higher returns.
Hussein pointed out that the government will "massively issue new debt" to the market, while the Federal Reserve is attempting to shrink its balance sheet to curb inflation and prevent the economy from overheating. The annual cost of interest on U.S. debt has exceeded $1 trillion, prompting the central bank to consider lowering interest rates.
