When looking at the Bitcoin chart on a weekly or daily basis, it’s evident that since achieving an all-time high of $69,000, the price has been constantly making lower lows.
Surprisingly, the price peak occurred on November 10th, just as the US revealed that inflation had reached a 30-year high, but the atmosphere swiftly changed following fears that China-based real estate developer Evergrande might default on its debts. The broader market structure appears to have been affected as a result.
Traders still have concerns about stablecoin regulation
Regulators and policymakers put constant pressure on stablecoin issuers following this initial corrective phase. On November 12, the US Securities and Exchange Commission rejected VanEck’s spot Bitcoin ETF application. The denial was in response to claims that Tether’s (USDT) stablecoin was insolvent, as well as concerns about Bitcoin price manipulation.
The US Banking, Housing, and Urban Affairs Committee convened a hearing on stablecoins on December 14 that focused on consumer protection and hazards, and the US Financial Stability Oversight Council (FSOC) expressed concern about stablecoin adoption and other digital assets on December 17. According to the paper, “The Council advises that state and federal authorities review available regulations and mechanisms that could be applied to digital assets”.
The CME’s Bitcoin futures contracts premium reflected investors’ gloomier mood. The metric compares the current spot price in normal markets to longer-term futures contracts.
This is an alarming red signal if the indicator fades or goes negative. Backwardation is a term used to describe the presence of a bearish mood.
These fixed-month contracts normally trade at a modest premium, indicating that sellers are asking for more money to defer settlement for a longer period of time. In healthy markets, futures should trade at a 0.5% to 2% yearly premium, or contango.
After Bitcoin fell below $49,000 on December 9, the indicator slipped below the “neutral” level. Although it is not yet a bearish structure, this shows that institutional traders are losing confidence.
Top traders are boosting their bullish wagers
Traders’ long-to-short net stance highlighted by statistics from the exchange. It is possible to determine whether professional traders are leaning bullish or bearish by examining each client’s position on spot, perpetual, and futures contracts.
Because different exchanges’ procedures differ from time to time, viewers should keep an eye on changes rather than exact data.
Despite Bitcoin’s 19% drop since December 3, top traders at Binance, Huobi, and OKEx have boosted their leverage long positions. To be more specific, Binance was the only exchange that saw a little decrease in the long-to-short ratio of its top traders. From 1.09 to 1.03, the figure has risen. OKEx traders, on the other hand, increased their optimistic bets from 1.51 to 2.91 in two weeks, more than offsetting the negative impact.
Because Bitcoin is currently testing the $46,000 level, its lowest daily close since Oct. 1, the lack of a premium in CME 2-month future contracts should not be deemed a ‘red signal’. Moreover, despite the price decline, major traders on derivatives exchanges have raised their long positions.
Regulatory pressure is unlikely to ease in the near future. But the US government has few options for suppressing stablecoin issuance and transactions. These businesses can relocate outside of the United States and function with dollar-denominated bonds and assets rather than cash. As a result, there is now little fear in the market. And data reveals that professional traders are buying the dip.