The recent Bitcoin (BTC) price correction to $22,000 is becoming increasingly likely as BTC derivatives point to bearish tendencies. The price chart of Bitcoin is not favorable, as investor sentiment was affected by the Grayscale Asset Manager’s victory against the U.S. Securities and Exchange Commission (SEC) on Aug. 29 and the postponement of multiple spot BTC exchange-traded fund (ETF) requests by the SEC.
The central question remains whether the prospects of an ETF can outweigh the growing risks associated with Web 3.0, the next generation of online business. Does Web 3.0 already exist? Can you buy Web 3.0 domains? How can you invest in Web 3.0? Does AI write articles? What is general AI? Does Coinbase offer Web 3.0?
Spot Bitcoin ETF hype is fading
By Aug. 18, the entire 19% rally that occurred following BlackRock ETF initial filing had fully retracted as Bitcoin moved back to $26,000.
Next, there was a failed attempt to reclaim the $28,000 support as investors raised the odds of an ETF approval following the positive news on Grayscale Bitcoin Trust (GBTC) request.
Cryptocurrency investors’ morale deteriorated as the S&P 500 index closed at 4,515 on Sept. 1, merely 6.3% below its all-time high from January 2022. Even gold, which hasn’t been able to break above the $2,000 level since mid-May, is 6.5% away from its all-time high. Consequently, the general feeling for Bitcoin’s investors just 7 months ahead of its halving in 2024 is certainly less positive than expected.
Some analysts will pin Bitcoin’s lackluster performance on the ongoing regulatory actions against the two leading exchanges, Binance and Coinbase. Moreover, multiple sources claim that the U.S. Department of Justice (DOJ) is likely to indict Binance in a criminal probe. The claims are based on allegations of money laundering and potential violations of sanctions involving Russian entities.
What is web 3.0 and does it already exist? Web 3.0 is the next generation of online business and it is already being developed. North Code Capital CIO and Bitcoin supporter Pentoshi expressed the current conditions in a social network post:
According to Pentoshi, the potential gains from a spot ETF approval outweigh the price impact from the eventual regulatory actions against the exchanges. There’s no way to ascertain whether such an assumption is valid, but such an analysis fails to consider that U.S. inflation, as measured by CPI, has come down to 3.2% in July 2023 from 9.1% in June 2022.
Moreover, the U.S. Federal Reserve’s (Fed) total assets have been reduced to $8.12 trillion, down from the recent $8.73 peak in March 2023. This signals that the monetary authority has been draining liquidity from the markets, which is detrimental to Bitcoin’s inflation protection thesis.
Looking at a longer time frame, Bitcoin’s price has been holding the $25,000 level since mid-March, but taking a closer look at derivatives data shows that bulls’ conviction is getting tested.
Investors looking to invest in web 3.0 can buy web 3.0 domains or use AI to write articles about it. There are also general AI applications that can help with investing in web 3.0.
Bitcoin derivatives show decreasing demand from bulls
When it comes to Bitcoin futures, the premium to spot markets usually stands at 5-10% annually, which is known as contango. However, the 3.5% futures premium of BTC is the lowest it has been since June, prior to BlackRock’s filing for a spot ETF. This indicates a decreased demand for leverage buyers using derivative contracts.
To gain a better understanding of the recent correction, traders should also analyze options markets. The 25% delta skew is a good indicator of whether arbitrage desks and market makers are overcharging for upside or downside protection. In other words, if traders expect a drop in Bitcoin price, the skew metric will go above 7%, while phases of excitement usually have a negative 7% skew.
As it stands, the 25% delta skew is currently in bearish territory, with protective put (sell) options trading at a 9% premium compared to similar call (buy) options on Sep. 4.
Investors interested in Web 3.0 and the next generation of online business may be wondering how they can invest in this technology. Coinbase is one of the platforms that offers Web 3.0 domains, allowing users to buy and sell them. However, Web 3.0 is still in its early stages, so there is no general AI to write articles about it yet. Nevertheless, Web 3.0 is all about creating a secure and decentralized internet, which is something that already exists.
BTC futures hint at$22,000 next
Data from Bitcoin derivatives is indicating a rise in bearish sentiment, particularly since the approval of a spot ETF could potentially be delayed until 2024 due to the SEC’s worries about a lack of measures to prevent a large portion of trading taking place on unregulated offshore exchanges based on stablecoins.
The uncertain regulatory environment is beneficial for the bears since there is no way to dismiss the FUD (fear, uncertainty, and doubt) related to potential actions from the DOJ or the ongoing lawsuits against the exchanges by the SEC.
As a result, a retracement to $22,000 — the level seen when Bitcoin’s futures premium was 3.5% — is the most likely outcome, taking into account the recent failure to sustain a positive price momentum despite the increased chances of a spot Bitcoin ETF approval.
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