The data shows that traders see $ 46,000 as a signal of Bitcoin’s current market structure

December 13th is likely to be remembered as “Bloody Monday” after Bitcoin price lost support at $ 47,000 and some altcoins fell by up to 25% in a short period of time.

When the downward move began, analysts quickly concluded that Bitcoin’s 8.5% correction was directly related to the U.S. Open Market Committee (FOMC) meeting that began December 14th.

Investors fear that the US Federal Reserve (Fed) will begin to cut its bond-buying program, which means that the current revision of monetary policy will have a negative impact on risky assets.

While there is no way to confirm such a hypothesis, Bitcoin saw 67% growth from the beginning of the year through December 12th. Hence, it is very likely that investors took profits first when they saw the correction in Bitcoin.

Weekly performance of the top cryptocurrencies on December 13th | Source: Nomics

Bitcoin price is down 8.2% over the past week, but it has also outperformed the broader market. This is in stark contrast to the past 50 days, when Bitcoin’s dominance dropped from 47.5% to 42%. Investors can easily escape to Bitcoin due to the relatively lower risk compared to altcoins.

Tether discount hits bottom at 4%

OKEx Tether (USDT) Premium measures the difference between peer-to-peer (P2P) transactions in China and the official currency of the US dollar. Metrics above 100% show excessive demand for crypto investments. On the other hand, a 5% discount usually indicates a large sales activity.

OKEx USDT peer premium versus dollar | Source: OKEx

The tether indicator bottomed at 96% on December 13, which is a slight but not alarming drop for the 10% decline in total crypto market cap. However, it has been more than two months since the metric crossed 100%, indicating a lack of enthusiasm from Chinese traders.

To further demonstrate that the Dec. 13 decline had little impact on investor sentiment, the total 24-hour liquidation was $ 400 million.

Total amount of cryptocurrencies that were liquidated on the futures exchange on December 13th | Source: Coinglass.com

More importantly, only $ 300 million long positions on futures contracts had to be canceled due to insufficient margin. That number is insignificant compared to the $ 2.1 billion crash on December 3.

There is currently no overwhelming demand from Bitcoin bears

To further demonstrate that the structure of the cryptocurrency market is not greatly affected by a sharp drop in prices, traders should analyze perpetual futures contracts that have fixed rates and typically charge a fee every eight months to offset the risk of the exchange.

A positive funding rate indicates that the long side is demanding more leverage. However, the reverse situation occurs when the short side requires more leverage and causes the funding rate to go negative.

8-hour financing rate for Bitcoin Perpetual Futures | Source: Coinglass

Although the overall market declined significantly on December 13th, the overall market structure was well organized. If there is too much demand for shorts betting that Bitcoin will fall below $ 46,000, the 8-hour funding rate for perpetual futures will drop below 0.05%.

Trading Tether at a 4% discount in markets where investors are based in China, $ 300 million in liquid long positions, and a neutral funding rate are not signs of a bear market.

Unless these fundamentals change dramatically, there is no reason the Bitcoin price should drop below $ 42,000.

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