A recent examination of the cryptocurrency landscape indicates that the influence exerted on Bitcoin by derivative instruments has significantly diminished, allowing for a renewed price discovery process.
The findings reveal that recent price declines have consistently attracted buying interest, and the maintenance of earlier low points suggests a generally positive market structure.
According to an analysis by Negentropic, one of Glassnode’s co-founders, Bitcoin is undergoing a notable structural transformation in its pricing framework. The report highlights that the “balancing effect” previously imposed by derivative markets has largely dissipated. As we approach what is anticipated to be the largest Bitcoin options expiration event ever—valued at around $23.6 billion—the selling pressure associated with hedging activities appears to be subsiding.
The study emphasizes that prior rallies leading up to option expirations were frequently dampened not by genuine supply and demand forces but rather through mechanical hedging transactions. With these funds exiting the market, Bitcoin’s pricing is no longer subjected to this type of “stabilization,” allowing market dynamics to dictate its value once more; thus, facilitating a return to effective price discovery which is likely to bolster upward momentum over time.
On a broader economic scale, liquidity conditions are showing signs of improvement. In November, the US M2 money supply experienced an annual increase of 4.3%, reaching an unprecedented high of $22.3 trillion—marking its 21st consecutive month of growth and exceeding last year’s peak by approximately $400 billion. Additionally, when adjusted for inflation, real M2 money supply also rose by 1.5% year-on-year for its fifteenth straight month.
This evaluation concludes that there is a clear long-term trend indicating ongoing dilution in fiat currencies while macroeconomic and structural factors are fostering an increasingly favorable environment for Bitcoin.
*This does not constitute investment advice.