Bitcoin’s (BTC) price declined for 8 consecutive days until May 13, totaling a 9.4% correction. The last time such a losing streak happened was on June 14, 2022, after the Celsius lending platform halted withdrawals and FUD emerged from U.S. software firm MicroStrategy’s loan being liquidated at $21,000.
Nothing remotely similar happened as Bitcoin retested the $25,800 support on May 12, apart from the network congestion and increased transaction fees. Traders and analysts speculated that a coordinated attack was aimed at causing network instability.
Bitcoin is under DoS attack. High transaction fees are the chosen pain point by the attacker, probably to makes bitcoin unusable for smaller players. pic.twitter.com/0J56liNSGf
— iris.to/jogi (@proofofjogi) May 7, 2023
As pointed out by investor and Bitcoin activist proofofjogi, high fees likely make the network unusable for smaller players, but they also impact the use of layer-2 scaling solutions such as the Lightning Network, as opening and closing payment channels require on-chain transactions.
The current FUD is quickly losing steam
Regardless of the rationale behind the surging demand for blockchain space, by May 12, the average transaction fee had already dropped 83% to $5.10 from a $31 peak on May 7, according to Blockchain.com data. It is also worth noting that the Ethereum network’s average transaction fee held above $18 between May 5 and May 11, according to Blockchair data.
Traders now question whether Bitcoin can bounce back above $28,000 given the uncertainty on the crypto regulatory front. Bitcoin futures and options data display moderate weakness, but a BTC price rally could happen as investors price in higher odds of an U.S. government debt default.
The current high interest rate environment is beneficial for fixed-income trades, while the risks of an economic downturn negatively weigh on risky assets such as Bitcoin. Traders should be especially careful if Bitcoin futures contract premiums flip negative or if increased costs for hedging using options occur.
Bitcoin futures remain neutral despite the price correction
Bitcoin quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.
As a result, BTC futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not…
Click Here to Read the Full Original Article at Cointelegraph.com News…
