After an agonizing 66 days, the Bitcoin (BTC) price finally broke through the psychological resistance of $20,000 on January 14. At the same time, the current market capitalization of $400 billion gives BTC a position among the top 20 global tradable assets, surpassing giants such as Walmart (WMT), Mastercard (MA) and Meta Platforms (META).
On one hand, Bitcoin bulls have reason to celebrate after its price rallied 34% from the $15,500 low on Nov. 21, but bears still have the upper hand on a broader time frame. , as BTC has dropped 52% in 12 months.
However, two events are expected that will determine the fate of investors in traditional finance. On January 16, China will announce its Gross Domestic Product figures and US retail sales will be released on January 18.
The fourth quarter earnings season will set the tone for this week’s stock results, including Goldman Sachs (GS), Morgan Stanley (MS), Netflix (NFLS) and Procter & Gamble (PG).
In the cryptocurrency markets, there is a slight relief coming from some unexpected places – or people. Entrepreneur Justin Sun is reportedly interested in acquiring assets from Digital Currency Group (DCG), the parent company of cryptocurrency lender Genesis and manager of the Grayscale funds.
On Jan. 16, Binance launched its off-exchange settlement solution for institutional investors. Regulated digital asset custody services offer additional security and allow investors to access the exchange ecosystem without the need to deposit directly on the platform.
Other positive news was the increase in Bitcoin mining difficulty by 10.26% on January 15, reflecting increased competition for block grants, a typically bullish indicator for the sector. This increases the security of the network, but more importantly, it shows that miners can find strategic power sources and are committed to the long-term investment that Bitcoin mining requires.
Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioning themselves in current market conditions.
The USD Coin (USDC) premium is a good indicator of demand from China-based retail cryptocurrency traders. Measures the difference between peer-to-peer trades in China and the US dollar.
Excessive buying demand tends to push the indicator above 100% fair value, and during bear markets, the stablecoin’s market supply is flooded, causing a discount of 4% or more.
The USDC premium currently sits at 97.5%, down from 100% two weeks earlier, indicating lower demand for the stablecoin from Asian investors. The data became relevant after the 24% rally between January 7 and 14, as one would have expected much higher demand from retail traders.
However, this data is not necessarily bearish as traders may be dumping stablecoins due to increased regulatory risks.
Futures Premium Finally Shows Neutral Sentiment
Retail traders often avoid quarterly futures because of their price difference to spot markets. Meanwhile, professional traders prefer these instruments because they avoid the fluctuation of funding rates in a perpetual futures contract.
Two month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. Therefore, when futures trade below that range, it shows a lack of confidence on the part of leveraged buyers, which is usually a bearish indicator.
The chart above shows positive momentum for the Bitcoin futures premium, which is now flirting with the neutral premium at +4%, the highest in five months. This indicator represents a dramatic shift from backwardation, the bearish sentiment that had prevailed since FTX’s collapse in November 2022 to early 2023.
Bitcoin needs to pull back to $20,000
Although the seemingly effortless rally to $20,000 looks encouraging, it has not recently been tested as a support level. At the same time, the absence of a stablecoin premium in Asia shows a lack of demand from retail buyers. However, the current discount of 2.5% does not reflect discomfort or anguish on the part of the sellers.
These data support the thesis that Bitcoin needs to retouch the $20,000 support to show investors that, regardless of how the stock market performs, bearish sentiment caused by FTX and Digital Currency Group contagion risks (DCG) has been left behind.
There is still a chance that macroeconomic data will support a continuation of the bull run, so either way could maintain the positive momentum.
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