If you look at Bitcoin’s chart from a weekly or daily perspective, it still has a bearish outlook and it’s clear that it has consistently hit lower lows since its all-time high (ATH) of $ 69,000.
BTC / USD price chart | Source: TradingView
Bitcoin peaked locally on November 10, just as the US announced that inflation had hit a 30-year high, but investor sentiment quickly reversed on concerns about the giant. This seems to have had an impact on the broader market structure.
This adjustment period was quickly followed by relentless pressure from regulators and policymakers on stablecoin issuers. The first was the rejection of VanEck’s Spot Bitcoin ETF by the United States Securities and Exchange Commission (SEC) on November 12th. The move is directly related to the view that Stablecoin Tether (USDT) is not a solvent, not a cryptocurrency bridge. and a concern about Bitcoin price manipulation.
On December 14, the U.S. Commission on Banking, Housing and Urban Development hosted a hearing on stablecoin risks and consumer protection. On December 17, the US Financial Stability Oversight Council (FSOC) raised concerns about the adoption of stablecoins and other digital assets.
“The board recommends that state and federal regulators review existing regulations and tools that can be applied to digital assets,” the report said.
The deteriorating sentiment among investors is reflected in the CME Bitcoin futures premium. The metric measures the difference between a longer-term futures contract and the current price on the conventional spot market.
Whenever this indicator fades or turns negative, it is a warning sign. This situation is also known as backwardation and shows that there is a bearish sentiment.
Bitcoin 2-month futures premium on CME vs. Bitcoin price | Source: TradingView
These fixed monthly contracts often trade at a small mark-up, suggesting that sellers are charging more money in order to withhold payments longer. Futures contracts typically trade at an annual premium of 0.5% to 2% in healthy markets, a situation known as contango.
Notice how the indicator moved below “neutral” levels after December 9th, when Bitcoin was trading below $ 49,000. This shows that institutional investors are expressing a lack of confidence, although it is not yet a bearish structure.
Data provided by exchanges shows traders’ long-to-short ratios. By analyzing each client’s position on spots, futures and perpetual contracts, people can better understand whether professional traders are trending up or down.
There are sometimes methodological differences between different exchanges, so every viewer should keep an eye on changes rather than absolute metrics.
Long-to-short ratio of professional bitcoin traders | Source: Coinglass
Despite the 19% correction in Bitcoin since December 3rd, professional traders at Binance, Huobi and OKEx have increased their long leverage. More specifically, Binance is the only exchange where the long-to-short ratio of top traders has fallen slightly, moving from 1.09 to 1.03. However, this influence was offset by traders on the OKEx exchange increasing their bullish bets from 1.51 to 2.91 within two weeks.
The lack of premium on CME 2-month futures contracts should not be viewed as a “red flag” as Bitcoin is currently testing resistance at $ 46,000, its lowest daily close since October. In addition, top traders on derivatives exchanges increased their long positions despite the price drop.
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-denominated assets in lieu of cash. Because of this, there is little panic in the market right now and as the data shows, professional traders are buying dips.
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