Bitcoin lost its all-time high level in March but maintained a strong performance level, while the values have remained relatively stable over the last few months as well. These are the effects of the exchange-traded funds and the hype they brought to the market, with those of the halving still not in the picture at the moment. Market indicators show the marketplace will continue to deliver solid performance throughout the rest of the year and into 2025, meaning that investors need to prepare to consolidate their portfolios. An important part of creating your strategy is learning about the factors affecting the price before you buy Bitcoin in order to ensure the success of your transactions.
And while carrying out transactions randomly might seem like a positive thing at a given time, it is unlikely to yield positive results in the long run.
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Macroeconomics
Although the crypto space is fundamentally different from traditional finance, the latter often has a profound effect on the former. Since cryptocurrencies operate on blockchains, systems that are fully decentralized, it goes without saying that they will be quite vulnerable to a plethora of external factors. The same trend is expected to arrive again in light of the upcoming United States data prints. The information will concern jobless claims and the initial revision of the Q1 GDP.
Both these figures have the potential to act as volatility catalysts for both cryptocurrencies and other assets that are associated with a higher level of risk. In the past, unemployment figures have been particularly noteworthy for the cryptocurrency market, so investors and analysts expect the release of the macros to be an eventful day in the Bitcoin world.
Momentum
For the values to grow, the bulls need to gain momentum, and so far, this has been a somewhat elusive movement. The $67,000 level was established as crucial as a line in the sand for investors who have nonetheless struggled to build up their strength in order to revisit the resistance level. Analysts believe this is because the momentum was lost below the $72K level, with the $70,000 margin being especially noteworthy. The relative strength index signals that the momentum is dwindling and that a further downside around $65,000 seems likely.
However, such a level would be necessary for Bitcoin to reach the bottom and start growing.
Derivatives
Bitcoin derivatives are showing bullish trends right now, something investors are certain has the potential to pave the way for future gains. The futures are especially noteworthy in this regard, as they reflect marketplace optimism. Perpetual contracts have become favorites among the investing community, primarily because of their lack of an expiry date. This is their main advantage compared to the traditional futures, one that most traders see as a highly positive thing. The purpose of these contracts is to keep track of the asset’s price through the means of a funding rate mechanism. When this rate is positive, long position holders pay those holding short positions and vice versa. As of May 2024, the funding rate for the Bitcoin perpetual futures is at around 0.35% on a weekly basis. This shows that leverage costs remain moderate, but investors believe there’s the potential for it to spike to 2.4% during times of heightened market optimism.
This would be an indicator of the elevated demand for leverage. The futures premium is another critical piece of data that many investors have turned to recently. In a healthy market, the basis rate for the futures is typically between 5% and 10% per year, and the premium exists precisely because the contracts have a predetermined settlement date for which traders are ready to pay extra in order to lock the prices. Right now, that figure is at 14%, a number that is above the neutral range but still not excessively high, showing that there’s still room for extra leverage without the risk of excessive liquidations.
Performance
Macroeconomic trends have naturally played a role in Bitcoin’s performance, and right now, the metrics show that the market is reasonably robust. S&P 500 is only 1.2% below the all-time high of 5,342, while the 5-year Treasury yield went from 4.34% to 4.63% in just two weeks. These numbers suggest that the investors are steadily moving away from fixed-income positions. The change became particularly noteworthy in the context of the weak demand at the Treasury Department auction that drove the benchmark yield to levels stock investors considered concerning.
The high levels of open interest point in the direction of bullish sentiment and indicate that Bitcoin futures are coveted digital assets at the moment. Yet, researchers warn that there’s a risk if the bulls become overly reliant on leverage, as it could mean that even a typical, standard market correction of around 10% could trigger a destructive wave of liquidations that serve to exacerbate the price drop. It’s also important to remember that the Bitcoin price has also become more stable since regulatory pressures have winded down a little.
The bottom line
The cryptocurrency space is well-known for its fluctuations, and it isn’t uncommon for things to change seemingly overnight. The introduction of new products, such as exchange-traded funds, was bound to leave a mark, and investors had, in fact, been waiting for this approval for years in anticipation of all the benefits it could bring. If you’re an investor, it’s crucial not to let the hype override your judgment and lead you to make impulsive decisions.
Although the cryptocurrency market can make it seem like any tiny opportunity is a once-in-a-lifetime type of thing, remember that things can change pretty quickly. If a trend looks like it might not be able to sustain itself for a longer time, it’s probably because it cannot. Don’t risk it all on an endeavor that may not even pay off; instead, focus on your strategy.
Make sure to do your research and leave room for flexibility since you’ll most likely need it. Don’t invest with money you cannot comfortably afford to lose, and definitely don’t put your savings into trading. While the stakes are high in the trading environment, you must still remember the importance of patience and attentiveness.