Bitcoin’s rally stalls as market stops paying premium for long exposure – Details
Rapid deterioration on the 7DMA basis highlighted that the market was unwilling to pay a premium to stay long anymore.
Bitcoin [BTC] was unable to scale the $80K-psychological level. The rejection from $79.4K on Wednesday, 22 April, saw BTC dip by 3.16% to reach $76,960. Since then, it has bounced to $77.6K. The past two days saw $214 million in short liquidations for Bitcoin alone.
The weak reaction from $79.4K and the subsequent bounce in recent hours gave way to the possibility that the rally might not be over just yet. It could see another sweep beyond the $80K-level, which was more than just a psychological round-number resistance.
In a post on X, analyst Joao Wedson drew attention to the rising trendline resistance. This level has been respected in recent weeks, and Bitcoin was about to test it once more.
The previous test in mid-March saw a sharp correction back to $65K. Should traders and investors prepare for another such downward spiral in the coming days?
Market is unwilling to pay a premium for long exposure
Crypto analyst Axel Adler Jr. pointed out that the 7-day moving average of the BTC Futures-Spot basis dropped from 0.465% to 0.054% over the past few days.
Basis measures how much the Futures market trades above or below Spot prices. Positive readings indicate Futures are trading above Spot. Market participants are willing to pay a premium to stay long in these conditions.
The rapid deterioration on the 7DMA basis highlighted that the market may be unwilling to pay a premium to stay long anymore.
At the same time, the funding rates have remained persistently below the zero level in recent months. According to the analyst, it represented a steady accumulation of bearish positioning.
Together, the Futures metrics underlined the defensive positioning of market participants. Pressure from bearish positioning and disappearing long leverage has made participants more cautious of Bitcoin’s weakness.
Short-term BTC holders begin taking profits
A previous AMBCrypto report made a case for why Bitcoin might run into a wall of selling around $80K. Profit-taking activity from holders was expected to dampen the upward momentum.
Analyst Amr Taha observed, in a post on CryptoQuant Insights, that the 24-hour BTC inflows to Binance spiked to 8,940 BTC. This was more than the mid-January spike, which measured 8,530 BTC.
The hike in profit-taking, combined with rising bearish positioning, highlighted the market conviction that the current uptrend might be nearing its end. A retracement towards $70K could follow soon.
Final Summary
- Bitcoin Futures-Spot basis rapidly dwindled and suggested that market participants were unwilling to pay a premium to retain long exposure.
- Hike in short-term holder profit-taking was stronger than the mid-January peak.
