Bitcoin price can’t find its footing, but BTC fundamentals inspire confidence in traders

Top weekly winers and losers on Jan. 17. Source: Nomics

Bitcoin price was flat over the past seven days, effectively underperforming the altcoin market's 7% gain. Part of this unusual movement can be explained by layer-1 decentralized applications platforms showing a positive performance that was driven by Fantom (FTM), Cardano (ADA), Near Protocol (NEAR) and Harmony (ONE).

Loopring (LRC), a zkRollup open protocol for decentralized exchanges on Ethereum, presented the worst performance of the week. The DEX volume using the protocol peaked at $30 million per day in early December 2021, but is now near $6 million. Meanwhile, Dfinity (ICP) and Chainlink (LINK) are adjusting after a 40% or higher rally in the first 10 days of 2022.

Tether's premium and the futures premium held up well

The OKEx Tether (USDT) premium or discount measures the difference between China-based peer-to-peer (P2P) trades and the official U.S. dollar. Figures above 100% indicate excessive demand for cryptocurrency investing. On the other hand, a 5% discount usually indicates heavy selling activity.

OKEx USDT peer-to-peer premium vs. USD. Source: OKEx

The Tether indicator bottomed at a 3% discount on Dec. 31, which is slightly bearish but not alarming. However, this metric has held a decent 2% discount over the past week, signaling no panic selling from China-based traders.

To further prove that the crypto market structure has held, traders should analyze the CME's Bitcoin futures contracts premium. That metric analyzes the difference between longer-term futures contracts to the current spot price in regular markets.

Whenever this indicator fades or turns negative, it is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.

BTC CME 2-month forward contract premium vs. Bitcoin/USD. Source: TradingView

These fixed-month contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlements for longer. As a result, futures should trade at a 0.5% to 2% premium in healthy markets, a situation known as contango.

Notice how the indicator flipped negative on Dec. 9 as Bitcoin traded below $49,000 but it still managed to sustain a slightly positive number. This shows that institutional traders display a lack of confidence, although it is not yet a bearish structure.

Considering that the aggregate cryptocurrency market capitalization is down 9.5% to date, the market structure held rather nicely. The CME futures premium would have gone negative if there had been excessive demand for short-sellers.

Unless these fundamentals change significantly, there is not yet sufficient information available that would support calls for a sub-$40,000 Bitcoin price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

• #Bitcoin

• #Cryptocurrencies

• #Altcoin

• #Bitcoin Price

• #Markets

• #Derivatives

• #CME

• #Tether

• #OKEx

• #Futures

• #Chainlink

• #Market Analysis

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