Bitcoin faces $80,000 resistance as derivatives shows signs of risk aversion

Bitcoin BTC$76,060.05, while it's slightly in the green may be in for a shock. The largest cryptocurrency has gained less than 0.5% since midnight UTC, and strong moves toward $80,000 are likely to run into opposition.

That's because short-term holders have a cost basis around that price, Luke Deans, a senior research associate at Bitwise, told CoinDesk. A move above may convince them to take profits and sell, capping any advance.

Another headwind may present itself in the form of U.S. March PCE inflation, which lands as oil prices keep pressure on risk assets. West Texas Intermediate crude has surged to as high as $110, and reduced traffic through the Strait of Hormuz has kept energy markets fragile.

Wednesday's Federal Reserve decision to hold the federal funds rate steady is also weighing on the market. Specifically, a whopping four dissenting voices, the most since 1992, with one governor pushing for a cut and three regional presidents opposing the statement's suggestion that the Fed would resume easing.

Deans also said altcoins remain tied to bitcoin, with the 180-day correlation and beta percentiles near 97% and 99%. That means tokens may move like levered bitcoin trades today.

“Beneath the surface, conditions typically associated with rising volatility appear to be forming,” Deans said. “Liquidity remains subdued, with profit- and loss-taking largely offsetting each other, reflecting a lack of directional conviction.”

In these environments, he said, price moves are often needed to unlock new liquidity.

Derivatives positioning

• Market-wide, futures open interest (OI) has dropped over 2% to $119 billion in 24 hours. Trading volumes, however, have increased 26% to $208 billion. The combination indicates that positions are being closed and capital is fleeing the market, a sign of risk aversion.
• Over $500 million in leveraged bets have been liquidated by exchanges, of which most are longs, or bullish positions. The market weakness amid rising bond yields has clearly caught bulls off guard.
• OI has dropped 2% in bitcoin futures and and 1.7% in ether. Similar declines are seen across most majors, except DOGE, whose OI still hovers at six-month highs.
• With the exception of XMR, XLM, TRX and CC, most coins, including the two largest, have seen sellers hit bids more than buyers lifting offers, leaving the 24-hour cumulative volume delta in the negative. In short, sellers are being more aggressive, which suggests potential for deeper price declines.
• Bitcoin's 30-day implied volatility index, BVIV, has dropped to 41%, extending the slide from the February high of 97%. Right now, the index is at its lowest since Jan. 29. Once again, this is telling a tale of a market that's become desensitized to adverse macro developments such as rising bond yields and elevated oil prices. Ether's volatility index shows a similar pattern.