Signs of a change in the emotions of traders; Will the downward trend be reversed?

The situation of some indicators related to digital currencies shows the change in the feelings of traders from descending to ascending. However, some analysts still believe that the long-term prospects for the market are diminishing.

According to the Kevin Telegraph, the total value of the digital currency market rose 10% to $ 1.68 trillion last week, a 25% improvement over the January 24 index (February 25). It is not yet possible to say with certainty that the market has found its price bottom, but two key indicators have recently risen. The Tetra / Yuan premium index and the Chicago Mercantile Exchange (CME) futures index with current markets have recently risen, indicating that positive sentiment is the main reason for the current rise in prices.

Total market value of the digital currency, excluding stable coins (billions billion)
Total market value of digital currencies, excluding stable coins (in billions of dollars).

The trader doesn’t just have to look at the price chart to imagine that the downtrend is over. For example, between December 13 and 27 (December 22 to December 6), the total value of the digital currency market increased from $ 1.9 trillion to $ 2.33 trillion. However, with the fall of the market on January 5, this growth of 22.9% completely disappeared within 9 days.

The Federal Reserve has fewer opportunities to raise interest rates

Despite the change in the current trend, sellers for some reason believe that the long-term 3-month downward channel in the digital currency market has not yet been broken. For example, the upward trend of 4 February may be a reflection of recent negative macroeconomic data. Among them is 2% annual growth in euro area retail activity in December, which was much lower than the market forecast of 5.1%.

Lynn Alden, an independent financial market analyst, recently suggested that the Federal Reserve may delay raising bank interest rates after the release of disappointing US employment data released on February 2. The ADP research institute also said 301,000 private sector jobs were cut in December, the worst figure since March 2020.

Regardless of the reason for the 10% increase in the price of bitcoin and Atrium on Friday, the first-class Tetra index on the stock exchange “OKX” reached its highest level in four months. The index compares the price difference between Tetra and the US dollar in peer-to-peer transactions (China-Yuan).

Peer-to-peer transactions in yuan and dollars
Compare prices in the yuan / tetra market with the yuan / dollar market

Excessive demand for digital currencies causes the indicator to exceed a reasonable value or 100%. On the other hand, in declining markets, investors tend to rush to Tetra, which will lead to a decline in the indicator by 4% or more. Thus, the upward trend on Friday had a significant impact on Chinese digital currency markets.

Forex traders are no longer sellers

To further demonstrate that the structure of the digital currency market has improved, traders must also analyze the Bitcoin futures index on the Chicago Board of Trade. This chart compares the market price of long-term futures and the current market price.

Every time this indicator goes down or down, it will be a warning to the market, as it shows a negative mood in traders.

Fixed-calendar contracts are usually traded at a small price difference, indicating that sellers expect higher profits for long-term maintenance. Fixed-term contracts are a group of financial products that are traded for a certain period of time. As a result, one-month futures contracts usually have to be traded at 0.5 to 1% per annum. This balance in the annual premium is called Contango; That is, conditions under which the price of futures markets is higher than the current one.

Premium one-month CME bitcoin contracts against Coin Base
The difference between the price of one-month bitcoin futures contracts on the Chicago Mercantile Exchange market compared to the current price of the Coin Base exchange.

The chart above shows how this indicator entered a downward trend on January 4 (January 14), when bitcoin fell below $ 46,000, and Friday’s movement shows the first change in the mood of traders in the last month.

Data on price differences in futures markets show that the sentiment of institutional traders remains neutral, but at least these data deny that the overall market structure is declining.

While the yuan / tetra premium index may have shown a reversal, the Chicago Mercantile Exchange premium index reminds us that there is still much uncertainty about Bitcoin’s ability to withstand inflation. However, the lack of excitement among Chicago Mercantile traders may be exactly what bitcoin needs to further strengthen its uptrend after breaking the $ 42,000 resistance.

The publication Signs of a change in the emotions of traders; Will the downward trend be reversed? appeared first for currency.

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