It has been 147 days since Bitcoin (BTC) closed above $25,000, and the result is that investors are less confident that the $20,000 support will hold. Underpinning these concerns are ongoing global financial and macroeconomic stresses, which intensified on November 7 after European Union officials raised concerns about the $369 billion US Inflation Reduction Act.
The expanded tax, health and climate bill passed in August and also includes subsidies for electric cars and battery supply chains that are made in North America.
According to CNBC, this is not the first time Europe has voiced its concerns, citing “discriminatory” international trade rules and policies.
There is additional uncertainty coming from the November 8 US midterm elections that will determine which party will control Congress. Democrats currently hold a majority in the House, but a change in this status could ease President Biden’s future spending plans.
In other news, Apple announced a temporary reduction in iPhone 14 production due to Covid-19 restrictions in China. To put things in perspective, Apple’s $2.2 trillion market capitalization has surpassed Alphabet (Google) and Amazon combined.
Let’s look at Bitcoin derivatives data to understand if the worsening global macroeconomic conditions have affected crypto investors.
Professional traders were not thrilled with the rally above $21,000
Quarterly futures are often avoided by retail traders due to the price difference from spot markets. Still, they are the instruments of choice for professional traders because they avoid the fluctuation in funding rates that often occurs in a perpetual futures contract.
The three-month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. The chart above shows that derivatives traders have been neutral to bearish over the past week as the Bitcoin futures premium stayed below 2.5% the entire time.
More importantly, the metric did not improve after BTC rallied 7% between Nov. 3-5 to test the $21,500 resistance. That price level was the highest since September 13, so the data reflects professional traders’ unwillingness to add long (bullish) leveraged positions.
Margin markets show bull resistance
Traders should also analyze the margin trading markets to understand how professional traders position themselves. Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position. For example, you can increase your exposure by borrowing stablecoins to buy an additional Bitcoin position.
On the other hand, Bitcoin borrowers can only short the cryptocurrency because they are betting that its price will go down. However, unlike futures contracts, the balance between long and short spreads does not always coincide.
The data shows that the OKX Traders Margin Lending Index has been relatively stable at 8 for the past week. On the one hand, the gauge is somewhat worrying, rallying from $20,050 to $21,475 on Nov 5, which should have had a positive impact on the margin lending ratio. The current level of 8.1 leaves enough room for sustainable leverage buying pressure when the time comes.
The metric remains bullish favoring stablecoin lending by a wide margin. Simply put, professional traders have held bullish positions using stablecoin margin lending.
Futures and margin metrics suggest that Bitcoin’s failure to hold the $21,000 support was insufficient to panic professional traders. The data also shows a modest degree of apathy because the recent 7% rally to $21,500 was not accompanied by increased demand for leveraged long positions.
The bears continue to exert their strength even as the elusive daily close of $25,000 becomes even more distant. Until macroeconomic conditions and political uncertainty dominate the headlines, bulls are less likely to have high hopes for a more sustainable rally.
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