There appear to be challenging days ahead for cryptocurrency investors as they strategize ahead of an impending rate hike, according to renowned analytics firm Glassnode.
The analysis released by Glassnode shows investors in the Bitcoin blockchain hedging out to keep them afloat and secure against the imminent hike in interest rates to be carried out by the Federal Reserve in March.
The flat futures term structure is the most significant change in Bitcoin. The new trend is due to investors’ doubts about the closely regulated fiat currency (USD) and whether it can recover from the Fed move.
Cointelegraph reported the proposed rate hike has already been priced in the spot market before any official announcement is even released. The long term impact to follow is not clear at the moment, said Micheal Van de Poppe, Cointelegraphs’ contributor.
However, Glassnode has observed the movement taken by investors against the impending hike, saying that investors are already taking necessary precautions to safeguard themselves from the incoming risk. Glassnode also states that investors use market derivatives to hedge any danger they might incur, thereby softening the blow from the proposed Fed moves.
The data indicates a positive move on the futures term structure curve which means that investors are not even expecting a bullish move in the whole of 2022, and the yearly premium placed on futures is 6% at the moment. The annual premium is the given price set above the dollar rate a trader is expected to play against the risk resulting from a futures contract.
If a trader chooses a higher premium, that trader is said to have a higher risk appetite for trading.
Tom Lee of Fundstrat believes that the current time is not encouraging for investors and potential traders, noting that an increased interest rate is bound to cause losses that will be difficult to recover.
Outflows Keep Rising
The exchange outflows continue despite traders restricting their trading risk in anticipation of the rate hike. The outflows from Bitcoin is way higher than the inflows it experiences. The last three weeks have seen the net outflows peak at 42,900 BTC in a month.
The results indicate that this is the most effective rate recorded since October 2021, when the value of Bitcoin rose upward to an all-time high of $69,000 last November.
How Holders controlled Bitcoin’s Supply
Holders of Bitcoin who have deposited their tokens for an average of 156 days consistently maintain stable control over the supply of Bitcoin by keeping 13.34 million worth of BTC dormant and ensuring the steady price equilibrium in the absence of excess supply.
The all-time high of October 2021 has seen long-term holders of the BTC hand over a modest 175,000 tokens, indicating support for the current price of $33,000 and the increased demand for more BTC.
Presently, Bitcoin is up by 4.19% over the past day and is trading at $43,552, as revealed by Cointelegraph.