Key Insights:

• Bitcoin’s ability to recover swiftly from Friday’s significant liquidity crisis indicates that demand for the cryptocurrency remains robust in the long run, despite the current cautious sentiment.
• Traders in the derivatives market are showing signs of wariness, as evidenced by negative funding rates and a reluctance to engage in significant trading.

Bitcoin (BTC) bounced back to the $114,000 mark within 48 hours following a flash crash that erased $15 billion from BTC futures open interest. While the cryptocurrency demonstrated resilience after this notable liquidity shock, several factors could hinder a return to the $125,000 mark.

As long as Bitcoin is perceived as a risk asset linked to tech stocks, sustained bullish trends will depend on improvement in global economic confidence.

Economic Concerns Impacting Bitcoin Price

Fears of a potential economic slowdown, highlighted by new indicators of weakness in the US labor market, have contributed to a rise in risk aversion among investors. According to estimates by Carlyle, the US added 17,000 jobs in September, a decline from 22,000 in August, as reported by The Wall Street Journal.
Translation: Según estimaciones de Carlyle, EE. UU. añadió 17,000 empleos en septiembre, lo que representa una disminución de 22,000 en agosto, según lo informó The Wall Street Journal.

The appeal of US government bonds has surged, resulting in yields approaching 3.5% as traders accept reduced returns for the security of these assets. This trend is exacerbated by fears of escalating trade tensions between the US and China, especially as the temporary ceasefire concerning US import tariffs is set to end on November 10.

On Sunday, President Trump noted on Truth Social that an extension should be negotiated for both countries to continue focusing on economic growth, although there have been no substantial updates aside from talks planned between the leaders.
Translation: Trump señaló que se debe llegar a un acuerdo para extender la tregua.

US Treasury Secretary Scott Bessent criticized new Chinese export regulations affecting rare earth materials, describing them as “provocative.” These rules require foreign companies to secure additional export licenses even if Chinese firms are not involved, perpetuating China’s dominance over these vital resources for technology manufacturing.

The persistent uncertainty stemming from the ongoing US government shutdown complicates the Federal Reserve’s outlook, as key economic data remain unavailable. Investors are on edge in anticipation of Chair Jerome Powell’s speech scheduled for Tuesday.

Regulatory and Market Caution in Bitcoin Derivatives

Despite potential improvements in US-China relations, traders remain vigilant regarding Bitcoin derivatives. There are still arbitrage opportunities present, particularly regarding differing rates between perpetual contracts and spot prices on the same platform. The reduced activity from market makers has raised concerns over counterparty risks.

The perpetual futures funding rate at Binance is negative, meaning those taking bearish positions are paying extra for leverage, but other exchanges have returned to a normal positive funding rate, creating potential arbitrage openings.

Joe McCann, CEO of Asymmetric Financial, suggested a significant market maker likely faced severe losses during the recent crash, which could explain the drastic price disparities across exchanges. While these issues may be temporary, traders are likely to adopt a more cautious approach before re-entering the market.

Kris Marszalek, CEO of Crypto.com, stated that exchanges should reassess their liquidation processes and pricing practices, particularly regarding discrepancies in treatment among users.

While Bitcoin’s unique attributes remain intact and could capitalize on rising demand for scarce independent assets, current negative sentiment among traders may postpone the ascent to new highs for several weeks or months.