Bulls rejoice! Money is trickling back into the crypto market and derivatives data suggests that investor confidence is improving as the market forms a bottom.
) gaining 10% on Friday, the Tether premium at OKX reached its highest level in four months. The indicator compares China-based peer-to-peer trades and the official U.S. dollar currency.Excessive cryptocurrency demand tends to pressure the indicator above fair value, or 100%. On the other hand, bearish markets tend to flood Tether's market, causing a 4% or higher discount. Therefore, Friday's pump had a significant impact on China-driven crypto markets.
It is an alarming red flag whenever that indicator fades or turns negative because it indicates that bearish sentiment is present. These fixed-calendar contracts usually trade at a slight premium, indicating that sellers are requesting more money to withhold settlement for longer. As a result, the 1-month futures should trade at a 0.5% to 1% annualized premium in healthy markets, a situation known as contango.The chart above shows how the indicator entered backwardation levels on Jan. 4 as Bitcoin moved below $46,000 and Friday's move marks the first sentiment trend reversal in a month.
Data shows that institutional traders remain below the"neutral" threshold as measured by the futures' basis, but at least reject the bearish market structure formation. While the CNY/Tether premium might have shown a trend shift, the CME premium reminds us that there's a lot of distrust in Bitcoin's capacity to function as an inflationary hedge. Still, the lack of CME traders' excitement could be exactly what BTC needs to further fuel the rally if the $42,000 resistance is broken over the weekend.
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