Looking at the Bitcoin chart from a weekly or daily perspective presents a bearish outlook and it is clear that the price (BTC) has been steadily declining since it hit an all-time high at $ 69,000.
Interestingly, the November 10 price spike occurred just as the United States announced that inflation had hit a 30-year high, but the mood quickly reversed after fears related to the China-based real estate developer. Evergrande that defaulted on its loans. This appears to have had an impact on the overall market structure.
Traders still fear stablecoin regulation
This initial phase of correction was quickly followed by relentless pressure from regulators and policy makers on stablecoin issuers. First came the rejection of the VanEck Spot Bitcoin ETF by the U.S. Securities Commission on November 12. The rejection was directly related to the view that Tether’s stablecoin (USDT) was not solvent and concerns about Bitcoin price manipulation.
On December 14, the United States Committee on Banking, Housing and Urban Affairs held a hearing on stablecoins focused on the protection of consumers and their risks, and on December 17, the Financial Stability Oversight Board of States United States (FSOC) raised concerns about the adoption of stablecoins and other digital assets. “The Council recommends that state and federal regulators review available regulations and tools that could apply to digital assets,” the report said.
The worsening mood of investors was reflected in the premium on the CME Bitcoin futures contracts. The metric measures the difference between long-term futures contracts and the current spot price in the regular markets.
When this indicator fades or turns negative, it is a red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.
These fixed-month contracts typically trade at a slight premium, indicating that sellers are asking for more money to hold the sale for longer. Futures should trade at an annualized premium of between 0.5% and 2% in healthy markets, a situation known as contango.
Notice how the indicator moved below the “neutral” range after December 9 when Bitcoin traded below $ 49,000. This shows that institutional traders are showing a lack of confidence, although it is not yet a bearish structure.
Major traders are increasing their bullish bets
The data provided by the exchange reveals the net positioning of traders between long and short. By analyzing each client’s position in spot, perpetual and futures contracts, it can be better understood whether professional traders are going bullish or bearish.
From time to time there are discrepancies in the methodologies between the different exchanges, so viewers should keep an eye on the changes rather than the absolute numbers.
Despite Bitcoin’s 19% correction since December 3, major traders on Binance, Huobi, and OKEx have all increased their leverage lengths. To be more precise, Binance was the only exchange that faced a modest reduction in the long-short ratio of major traders. The figure went from 1.09 to 1.03. However, this impact was more than offset by the increase in bullish bets from OKEx traders, which went from 1.51 to 2.91 in two weeks.
The lack of a premium on CME 2-month futures contracts should not be considered a “red alert” because Bitcoin is currently testing resistance at $ 46,000, its lowest daily close since October 1. Additionally, leading derivatives exchange traders have increased their long positions despite the price drop.
Regulatory pressure will likely not lift anytime soon, but at the same time, there is not much the US government can do to suppress stablecoin issuance and transactions. These companies can relocate outside of the United States and operate using dollar-denominated assets and bonds instead of cash. For this reason, currently, there is hardly any sense of panic in the market and according to the data, professional traders are buying the dip.
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