Bitcoin shows a distinct difference between books and derivatives.
However, how this setup works depends on the larger environment.
In a risk-adjusted market, high-quality derivatives can contribute significantly to the upside. In risky markets, high volatility increases the risk of a risky correction. The recent US-Iran uncertainty has brought macro FUD to the market.
However, the Crypto Fear & Greed Index had a big scare. That stabilization has revived the argument that BTC’s bear market may be over.
However, history tells a different story.
As the chart shows, the current Bitcoin bear market lasted 248 days. In comparison, the 2022 bear market lasted 381 days, while the 2018 bear market lasted 385 days, indicating that the current cycle may have some room to run.
Institutionalization also supports that view.
As the market shrugged off the risk, Bitcoin ETFs saw more than $85 million in outflows after three straight days of inflows, showing how quickly institutions bounced back as greater uncertainty returned.
Bitcoin’s Coinbase Premium Index tells a similar story.
The index has fallen into negative territory, reflecting a decline in demand for US real estate and suggesting that institutional buyers have become more cautious as the risk worsens.
Taken together, the data suggests that Bitcoin is still far from the danger zone, and the cycle of the excessive bear has not changed. In contrast, the spatial-variation difference is more important.
So, what does it tell us about Bitcoin’s next move?
Bitcoin derivatives are increasing as the demand for space decreases
In a volatile market, liquid injection can send mixed signals.
At this point, the trend is looking less bullish.
Tether recently generated $1 billion in new USDT even as the overall stablecoin market continues to decline. Instead of rushing to risky assets, many of those assets seem to be sitting on the sidelines, meaning investors are holding onto dry powder instead of buying Bitcoin.
The chart below shows why it matters.
Bitcoin’s 30-day demand has increased from around -500,000 BTC to -75,000 BTC, but the recovery has been driven almost entirely by derivatives. Futures demand has risen from around -295,000 BTC to slightly positive, while spot demand remains weak at around -78,000 BTC.
Naturally, this leaves Bitcoin in a clear position against derivatives.
Based on this, the recent injection of $ 1 billion USDT may add fuel to the Bitcoin market more than its own market.
With the speculative sector already leading the recovery, new investment could drive it support even higher rather than attracting real estate buyers. This could leave Bitcoin’s recovery vulnerable to further damage if sentiment is lost on the risk.
At this point, Bitcoin’s bear cycle still seems far off. If history is any indication, the current cycle has not reached the height of previous bear markets.
Brief Summary
- Bitcoin’s recovery is driven by strength, while demand for space remains weak, making the rally fragile.
- With so much uncertainty still rife and new USDT coins entering the market, Bitcoin’s bear cycle may continue.
