Research firm Glassnode sees several signs investors are hedging against risk as the US Federal Reserve hikes interest rates.
Glassnode's on-chain data analysis shows that Bitcoin ( BTC ) investors are hedging risk ahead of the Federal Reserve's March rate hikes.
In Glassnode's The Week On-Chain newsletter Monday, the key trend in Bitcoin right now is the flat futures structure through March. This is largely due to "investor uncertainty about the broader economic impact of a stronger US dollar."
According to Cointelegraph contributor Michaël van de Poppe, spot markets have already priced in the rate hike , but the longer-term impact is still unclear. Glassnode has then observed that investors are taking steps to protect themselves from the potential low downside risk.
“It appears investors are deleveraging and using derivatives markets to hedge against risk and buy downside protection given the US Federal Reserve's interest rate hikes in March.”
While the data clearly shows an objective flat area on the futures structure curve, it also suggests that investors don't expect a significant breakout to the upside until late 2022. The annualized premium for futures is currently just 6 percent.
The annualized premium is the value, over a dollar, that someone pays for the risk of a futures contract. A higher premium indicates a higher risk appetite.
Glassnode's on-chain data analysis shows that Bitcoin investors are hedging against risk amid US Federal Reserve rate hikes in March.
Further evidence of the lack of investor confidence is the slow but steady de-leveraging through voluntary futures position closures. This reduction in risk has caused total futures open interest to fall from 2 percent to 1.76 percent of the total market cap of all cryptocurrencies, according to Glassnode. This trend suggests a "protection preference, conservative use of leverage, and a cautious approach to storm clouds on the horizon."
Fundstrat chief executive Tom Lee agrees that traditional assets such as bonds are in for a tough time. He told CNBC Monday that if interest rates were to turn around, "you're guaranteed to lose money over the next 10 years if you own bonds. That's almost $60 trillion out of the $142 trillion."
However, Lee also noted that the $60 trillion is likely to flow into cryptocurrencies, where investors can continue to earn returns that rival or even exceed those on bonds. He said:
"I think there's more likely to be a lot of speculative capital flowing in from stocks. The roots of that capital are in bonds and eventually it will flow into crypto."
More stock market outflows
Although market participants are clearly de-risking ahead of the Federal Reserve rate hike, bitcoin outflows from exchanges still far outweigh inflows. Over the past three weeks, outflows have totaled 42,900 BTC per month. That's the highest outflow rate since October of last year, when BTC price surged to a new all-time high of around $69,000 in November.
Long-term bitcoin holders (i.e., people who hold their bitcoin for at least 156 days and don’t trade) hold the bulk of the supply in circulation, at around 13.34 million BTC. Since the October 2021 peak, long-term holders have given up just 175,000 BTC. This highlights support at the recent low of $33,000 and demand for more coins .
According to Cointelegraph, Bitcoin is up 4.19 percent over the past 24 hours and is currently trading at around $44,000.
My Top PicksHoneygain - Passive earner that pays in BTC or PayPalMandalaExchange -The Best no KYC crypto Exchange!
BetFury - Play And Earn BFG for daily Bitcoin and ETH dividends!
Pipeflare - Faucet that pays in ZCash and Matic, Games pay in DAIWomplay - Mobile dApp gaming platform that rewards in EOS and BitcoinCointiply - The #1 Crypto Earning SiteLiteCoinPay -The #1 FaucetPay earner for LitecoinUpland - Collect Digital Properties & Test Your SkillsLBRY/Odysee - YouTube Alternative that lets you earn Money by viewing videos!FaucetPay - The #1 Microwallet PlatformFREEBTC - The #1 FaucetPay earner for Satoshi'sFaucetCrypto - An earning/faucet site that pays out instantlyFireFaucet - An earning site that pays better for some than Cointiply
DogeFaucet - Dogecoin Faucet
xFaucet - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, FEY - Claim every 5 minutes
Konstantinova - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, USDT, FEY, 25 Claims Daily