Looking at the Bitcoin chart from a weekly or daily perspective represents a bearish outlook and it becomes clear that the price (BTC) has steadily declined since reaching an all-time high of USD 69,000.
Interestingly, the price spike came on November 10 just as the United States announced that inflation had hit a 30-year high, but sentiment quickly reversed on fears associated with it as China-based real estate developer Evergrande started its Loan was in default. This seems to have had an impact on the overall market structure.
Traders still fear the regulation of stablecoins
This initial phase of correction was quickly followed by relentless pressure from regulators and policymakers on stablecoin issuers. First came the rejection of the VanEck Spot Bitcoin ETF by the US Securities Commission on November 12th. The rejection was directly related to the view that the stablecoin tether (USDT) was not solvent and concerns about manipulating the Bitcoin price.
On December 14, the United States Committee on Banking, Housing and Urban Affairs held a hearing on stablecoins that focused on protecting consumers and their risks, and on December 17, the United States’ Financial Stability Supervisory Board delivered its opinion (FSOC) concerned about the acceptance of stablecoins and other digital assets. “The council recommends that state and federal regulators review the available regulations and tools that may apply to digital assets,” the report said.
The deteriorating sentiment of investors was reflected in the premium of the CME Bitcoin futures contracts. The metric measures the difference between long-term futures contracts and the current spot price on the regular markets.
If this indicator fades or turns negative, it is an alarm signal. This situation is also known as backwardation and indicates a bearish sentiment.
These fixed month contracts typically trade at a small premium, suggesting that sellers are charging more cash to keep the settlement 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” zone after December 9th, when Bitcoin traded below $ 49,000. This shows that institutional traders are lacking confidence, although it is not yet a bearish structure.
Big traders are increasing their bullish bets
The data provided by the exchange shows the net positioning of traders between long and short. By analyzing each client’s position in spot, perpetual and futures contracts, you can better understand whether professional traders are going bullish or bearish.
From time to time there are discrepancies in the methods used between different exchanges, so viewers should keep an eye on the changes rather than the absolute numbers.
Despite Bitcoin’s 19% correction since December 3rd, major traders on Binance, Huobi and OKEx have increased their leverage length. Specifically, Binance was the only exchange to face a slight reduction in the long-short ratio of major traders. The number rose from 1.09 to 1.03. However, that impact was more than offset by the surge in bullish bets from OKEx traders, which rose from 1.51 to 2.91 in two weeks.
The lack of a premium on CME 2-month futures contracts should not be viewed as a “red alert” as Bitcoin is currently testing resistance at $ 46,000, its lowest daily close since October 1. In addition, leading futures traders added to their long positions despite the decline in prices.
Regulatory pressures are unlikely to ease off anytime soon, but at the same time, there is not much the U.S. government can do to suppress stablecoin issuance and transactions. These companies can set up outside of the United States and operate with dollar-denominated assets and bonds in lieu of cash. Because of this, there is little panic in the market at the moment and the data suggests that professional traders are buying the dip.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you must do your own research when making a decision.