Bitcoin Investors De-Risking Ahead of March Interest Rate Hikes

The last week, saw the top crypto asset in a relatively volatile space as reports about Russia’s plans to invade Ukraine emerged.

That said, numerous macro factors have given way to skepticism and volatility in the Bitcoin market including the tightening of Fed policy expected in March.

Market Matures as Liquidity Deepens

The Bitcoin derivatives market was shadowed by uncertainty with a flattening out of the futures term structure curve until March.

That said, a Glassnode report pointed out that BTC futures premiums out to the end of 2022 are considerably low, trading at a mere 6% annualized, eliminating the possibility of a wild short-term price uptick. 

Notably, the futures term structure has flattened out through to March, in tandem with the expected rate hikes proposed by the Federal Reserve.

With the top coin’s current trajectory looking rangebound, participants seem to be expressing a strong preference for protective put options to effectively manage market risk. 

In contrast, on-chain supply dynamics for Bitcoin still looked solid which was indicative of investors holding on to the top coin.

Bitcoin still continued to flow out of reserves and into investor wallets at a rate of 42.9K BTC per month. This trend of net outflows has been sustained for around 3-weeks, supporting the current price bounce from the recent $33.5K lows.

Overall, this speaks to the continuing maturation of the Bitcoin market, as liquidity deepens, and more comprehensive risk management instruments become available. This differs greatly in comparison to historical Bitcoin market cycles where de-risking was possible only by the sale of coins in spot markets.

BTC Price Recovers

While BTC’s turbulent price action has given way to many spot-driven sell-offs, long-term HODLers have been resilient. Since the October ATH, LTHs have spent only 175K BTC on net, demonstrating exceptional resilience, despite the prevailing macro headwinds.

At press time, BTC’s price was headed towards the $45K resistance mark once again, trading at $44,200.20 noting a 4.68% rise in price over the last day. However, since BTC has faced considerable resistance at that mark another rebound from that price range could be expected. 

Overall, though, looking at the derivative and futures market the trend speaks to the continuing maturation of the Bitcoin market, as liquidity deepens, and more comprehensive risk management instruments become available.