Crypto regulation is coming soon, but bitcoin traders are still buying discounts

The premium on CME bitcoin futures has fallen, but data shows professional traders remain optimistic.

Market analysis

One look at the Bitcoin chart from a weekly or daily perspective shows a bearish outlook and it is clear that price (BTC) has consistently hit lower lows since hitting an all-time high of $ 69,000.

Oddly enough, the price high hit on November 10 just as the US announced that inflation had hit a 30-year high, but sentiment quickly reversed after concerns about developer real estate. This seems to have had an impact on the broader market structure.

Traders are still concerned about stablecoin regulation

This initial adjustment period was quickly followed by relentless pressure from regulators and policymakers on stablecoin issuers. The first is VanEck’s Spot Bitcoin ETF’s rejection by the U.S. Securities and Exchange Commission on November 12th. The rejection is directly related to belief that Stablecoin Tether (USDT) is not a solvent and concerns about Bitcoin’s price manipulation.

On December 14th, the U.S. Commission on Banking, Housing and Urban Affairs hosted a stablecoin hearing on consumer protection and its risks, and on December 17th, stablecoins and other digital assets. Factory. “The board recommends that state and federal regulators review existing regulations and tools that can be applied to digital assets,” the report said.

The worse sentiment among investors is reflected in CME’s Bitcoin futures premium. The metric measures the difference between a longer-term futures contract and the current spot price on the conventional market.

Whenever this indicator fades or goes negative, it is an alarming red flag. This situation is also known as a retracement and shows that there is bearish sentiment.

These fixed month contracts typically trade at a small premium, suggesting that sellers are charging more money in order to withhold payments longer. Futures should be traded in healthy markets at an annual premium of 0.5% to 2%, a situation known as contango.

Notice how the indicator moved below the “neutral” zone after December 9th, when Bitcoin was trading below $ 49,000. This shows that institutional traders are lacking confidence, although it is not yet a bearish structure.

Top traders raise their bullish bets

The data provided by the exchange shows a trader’s net long-to-short position. By analyzing each client’s position in spot, futures and futures contracts, one can better understand whether professional traders are trending up or down.

There are sometimes methodological differences between different exchanges, so viewers should keep an eye on changes rather than absolute metrics.

Despite Bitcoin’s 19% correction since December 3, the top traders at Binance, Huobi and OKEx have increased their leverage length. More specifically, Binance is the only exchange facing a slight decline in the long-short ratio of top traders. That number has increased from 1.09 to 1.03. This impact was more than offset, however, with OKEx traders increasing their stakes from 1.51 to 2.91 within two weeks.

Related: SEC Commissioner Elad Roisman is leaving in late January

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. In addition, top traders on derivatives exchanges increased their buy orders despite the price falling.

Regulatory pressures are unlikely to increase in the short term, but at the same time there is not much the US government can do to stop the issuing and trading of stablecoins. These companies can move outside of the United States and operate in bonds and dollar assets instead of cash. Because of this, there is little panic in the market right now and as the data shows, professional traders are buying at a discount.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.