The premium of bitcoin on Bitfinex has dissolved in recent months. It is trading at a similar price range as spot exchanges and the last time it did, which was in August 2019, a brutal correction followed.<\/p>\n
There are many factors at play when bitcoin often enters a short-term bear market. Hence, it is premature to claim that the drop of premium rates on Bitfinex can solely contribute to a big pullback.<\/p>\n
But, it is an indicator investors can observe in the coming weeks as it may show a glimpse of the trend of BTC throughout the first quarter of 2020.<\/p>\n
Often times, Tether (USDT), a stablecoin whose value is pegged to that of the U.S. dollar, trades at slightly below $1. As such, it causes the price of bitcoin to be higher on Tether-based exchanges in comparison to spot exchanges with fiat trading pairs.<\/p>\n
The lack of premium on Bitfinex, despite its long history of having a high premium over other exchanges, may indicate that there is a lack of buying demand on the exchange.<\/p>\n
It is also possible that the Tether market has simply stabilized and there are no lingering fears about the operations of Bitfinex by its users.<\/p>\n
For that reason, the absence of premium rates on Bitfinex in itself is not enough to determine the short-term outlook of bitcoin.<\/p>\n
In August 2019, when premiums dropped, bitcoin was ranging in an overbought area with the price peaking tat $13,000. It increased by nearly three-fold within merely three months prior to that.<\/p>\n
The bitcoin price dropped by more than 30 percent after August 2019 (Source: TradingView)<\/p>\n
The bitcoin price abruptly rising by around 200 percent within three months and technical indicators showing oversold conditions among other factor all contributed to BTCs correction in the following months.<\/p>\n
The current situation with premiums on Bitfinex demonstrates three key elements:<\/p>\n
Throughout the past week, the bitcoin price saw two attempts to break out of $8,400, which has acted as a heavy resistance level for the dominant cryptocurrency since last November.<\/p>\n
After a traditional inverse head and shoulders formation was printed on the daily chart of bitcoin, traders generally expected BTC to move past crucial resistance levels in the short-term.<\/p>\n
The struggle of BTC to break out of $8,400 along with relatively low volumes across the board and the absence of a premium on Bitfinex indicate that an extended rally at this point could be difficult to materialize.<\/p>\n
In the medium to long-term, technical analysts and research firms remain optimistic on the price trend of BTC, especially heading towards the end of 2020.<\/p>\n
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Bitfinex Premium Goes Negative; Last Time it Did, Bitcoin Fell 30% in 3 Months - newsBTC<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" The premium of bitcoin on Bitfinex has dissolved in recent months. It is trading at a similar price range as spot exchanges and the last time it did, which was in August 2019, a brutal correction followed. There are many factors at play when bitcoin often enters a short-term bear market. Continue reading