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Glassnode, an on-chain data analysis platform, has revealed that cryptocurrency investors are taking measures to hedge against the potential risk of a market slump next month after the US Federal Reserve hikes the interest rates.
Crypto investors wary about a possible dip in March
On its weekly on-chain report, Glassnode stated that the behaviour of Bitcoin investors as March approaches shows they are hedging against a possible downtrend. The analytics platform said that investors were uncertain about “the wider economic impact of a tighter US dollar.
“It appears that investors are deleveraging and utilizing derivatives markets to hedge out risk and buy downside protection, with a keen eye on the Fed rate hikes expected in March,” Glassnode said.
The Glassnode data also shows that investors are not anticipating a major bullish market in 2022, with the annualized premium on futures at 6%.
The deleveraging by voluntary closures of futures positions is another sign that investors anticipate a price dip. Following this, the total futures open interest has declined from 2% to 1.76% of the global crypto market cap.
However, not everyone believes that the interest rate hike will be bad for the crypto market. Tom Lee, a managing partner at Fundstrat, has argued that more inflow into crypto would be recorded in the coming months.
“For the next 10 years, you’re guaranteed to lose money owning bonds… that’s almost $60 trillion of the $142 trillion,” Lee said. In an interview with CNBC, he said that this $60 trillion would end up in the crypto space to enable investors to continue earning yields.
Bitcoin outflow on exchanges continues
While the market anticipates a price dip after the interest rate hike by the US Federal Reserve, the outflow of Bitcoin from exchanges has continued. The monthly average of outflows currently stands at 42,900 BTC. Last October, a similar trend was observed before Bitcoin’s price moved to an all-time high of around $69K in November.
Long-term Bitcoin holders currently account for a circulating supply of around 13.34 million BTC. Long-term BTC holders have held on to the coins despite the January dips. Since October, long-term holders have only sold 175,000 BTC.
On the other hand, Bitcoin’s price movement showed a strong recovery on February 15. It has gained by 4.1% during the past 24 hours. At the time of writing, BTC was trading at $44,250, according to CoinGecko.
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