Bitcoin Premium Hints at Low Risk Tolerance, But There's a Catch

Bitcoin Premium is showing a clear shift into a bearish pressure phase. Bitcoin (BTC) investors are currently pricing risk lower, indicating weak demand for leverage and rising caution. However, analysts are optimistic that it could be the first sign of recovering confidence.

Bitcoin Futures spot basis flips negative

According to on-chain data analytics provider CryptoQuant, Bitcoin Basis has flipped negative. When Basis is positive, it means futures traders are usually bullish, with strong demand for leverage and long positions.

In contrast, when Basis is negative, the market is usually bearish, as futures traders are paying to get out of positions. On the derivatives market, this is a clear regime change from bullish to bearish sentiment.

The spot Basis usually flips negative when traders no longer want leveraged long exposure. It could also happen when there is real selling pressure or fear of a price drop.

According to the data shared by CryptoQuant, Bitcoin is currently trading inside the Base Zone. This area typically reflects selling pressure or position reduction.

Short-term bearish futures sentiment is further confirmed by both the 7-day and 30-day moving averages sloping downwards.

Simply explained, Bitcoin futures are cheaper than the spot Bitcoin price for the first time in a while. This almost always means traders are scared, closing long positions or unwilling to bet on higher prices.

Also, the market has stopped paying a risk premium to stay long Bitcoin.

Signs of Bitcoin recovery?

Traders watch for the Basis to turn positive again as one of the earliest signals that confidence is coming back. Thus, a new leg up could start soon if the Basis climbs back above 0%-0.5%.

Until then, the derivatives market will remain cautious and bearish. Bitcoin began the week in a downtrend, plunging to a low of $93,763.

Following this plunge, Dogecoin Creator Billy Markus threw a jab at the leading coin. Billy asked whether Bitcoin is “stupid or something.”

Billy also joked about the bad BTC price, telling himself he would buy with deeper discounts but backing out.

Despite his pessimistic sentiments, BTC community members raised an optimistic forecast for Bitcoin. They argued that the coin tends to bounce back twice as hard and urged traders to buy the dip.

Meanwhile, the declining BTC prices also raised discussions about a potential supply shock. For now, it is not clear when the long-awaited supply shock will occur, as 95% of Bitcoin’s supply is already out there on the market.