Bitcoin Nears Fourth Red Month Despite Strategy's $264M Purchase

Note: This is an AI generated insight from Arkham's proprietary AI: ULTRA. The content has been edited and verified by one of Arkham’s Editors before being published. To access the insight directly, go to the Insights page on the Arkham Intel Platform.

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Bitcoin's price has been in a notable slide, with the market on the verge of a potential fourth consecutive red month – a trend not seen since 2018. This sustained downturn was exacerbated by a massive liquidation spike of $750 million amid a recent weekend price drop, indicating significant forced selling of leveraged long positions.

Macro Drivers of Bearish Sentiment

Several macro-level drivers are contributing to this bearish sentiment. Geopolitical factors and uncertainty surrounding Federal Reserve succession are key concerns. During these times of macro uncertainty, Bitcoin is being treated as a risk asset, trailing behind traditional safe havens like gold. 

Mixed Signals from the Derivatives Market

The derivatives market presents a complex, though predominantly bearish, picture. On Deribit, BTC's funding rate exhibited a significant positive outlier, suggesting aggressive buying into the dip or a potential short squeeze on that specific exchange. However, this contrasts sharply with a significant negative outlier in BTC's funding rate on OKX, where short positions are aggressively paying longs, indicating strong bearish sentiment among perpetual traders.

Furthermore, a negative outlier in BTC's delta skew on Deribit signals a strong bearish bias in the options market, with traders paying a premium for downside protection, consistent with expectations of further price declines.

Supply-Side and Economic Factors

Real-world events are also impacting Bitcoin's supply dynamics. US winter storms are causing miner curtailments, leading to slower block times and highlighting a tangible impact on the network's health and potential supply shocks. 

The slowdown is visible among US-based mining pools, as extreme weather strained electricity systems across several regions, according to public network data on Mining Pool Stats. Foundry – a miner validator exposed to US mining operations – saw its hashrate drop sharply from about 260 EH/s on January 24 to roughly 124 EH/s the following day, before recovering to around 134 EH/s.

Concurrently, the macroeconomic context of a reported "Dollar Crisis" and a boom in gold and silver reinforces the narrative that Bitcoin is being treated as a risk asset during a flight to traditional safe havens, significantly influencing its price trajectory.

Corporate Accumulation Continues Amidst Volatility

Despite the prevailing bearish sentiment and market volatility, corporate entities continue to demonstrate long-term conviction in Bitcoin. MicroStrategy recently acquired an additional 2,932 BTC for $264 million, bringing its total holdings to over 712,000 BTC. Similarly, Metaplanet revised its revenue outlook upwards despite reporting substantial unrealized losses on its BTC holdings.

This indicates a mixed sentiment where some firms acknowledge past market downturns but maintain a bullish long-term outlook and continue to accumulate the asset.