Data Shows: Traders See $46,000 as Bitcoin’s Last Floor

Dec. 13 is likely to be remembered as a "bloody Monday," with the price of Bitcoin (BTC) losing support at $47,000 and altcoins dropping as much as 25% in an instant.

When the move took place, analysts were quick to deduce that Bitcoin’s 8.5 percent pullback was directly related to the Federal Open Market Committee (FOMC) meeting, which began on Dec. 15.

Investors worry that the Fed will eventually begin to taper its bond purchases, or simply put, reduce the Fed's bond buyback program. The logic is that revisions to the current monetary policy will have a negative impact on riskier assets. While that assumption cannot be confirmed, Bitcoin is up 67% year-to-date as of Dec. 12. Therefore, it would make sense for investors to pocket these profits before the market becomes uncertain, which may be related to the current pullback in Bitcoin prices.

Bitcoin prices have corrected 8.2% over the past week, but it has also outperformed the altcoin market as a whole. This is in stark contrast to the past 50 days, as the market share (dominance) of the leading cryptocurrency dropped from 47.5% to 42%. Since Bitcoin is relatively less risky than altcoins, investors can move directly to Bitcoin.

Tether's discount is as low as 4%

The premium or discount on OKEx Tether (USDT) measures the difference between China-based peer-to-peer (P2P) transactions and the official dollar currency. Figures above 100% indicate excessive demand for cryptocurrency investments. On the other hand, a 5% discount usually indicates heavy selling activity.

The Tether indicator fell to 96% on Dec. 13, which is slightly pessimistic, but not shocking for a 10% drop in the total cryptocurrency market capitalization. However, this indicator has been above 100% for more than two months, showing a lack of excitement among Chinese traders.

In further evidence that the price crash on Dec. 13 only slightly impacted investor sentiment, the total liquidation volume in 24 hours was $400 million.

What's more, only $300 million of long-term leveraged contracts were forced to liquidate due to insufficient margin. That figure looks insignificant compared with the Dec. 3 crash, when $2.1 billion of leveraged buyers were liquidated.

Bitcoin Bears Don’t Have Excessive Demand Right Now

For further evidence that the cryptocurrency market structure has not been strongly affected by the price crash, traders should analyze perpetual futures. These contracts have an embedded rate, typically charged every eight hours, to balance the risk of the trade.

A positive funding rate indicates that the longs (buy side) are demanding more leverage. However, the opposite happens when shorts (sellers) demand more leverage, which causes the funding rate to turn negative.

Considering that most cryptocurrencies suffered considerable losses on December 13, the overall market structure held up well. If there is excessive demand for shorts betting that the price of Bitcoin will fall below $46,000, the 8-hour funding rate of perpetual futures will be below 0.05%.

Tether is trading at a 4% discount on Chinese markets, $300 million in long contract liquidations and neutral funding rates are not the hallmarks of a bear market. Unless there is a major change in these fundamentals, there is no reason for Bitcoin to reach $42,000 or lower.