Crypto regulation is coming, but Bitcoin traders are still buying on dips


From a weekly or daily perspective, the Bitcoin chart shows a bearish outlook, which is obvious (Bitcoin) Since setting a new all-time high of $69,000, the price has been continuously hitting lower lows.

Bitcoin/USD on FTX. Source: TradingView

Strangely, the price peak on November 10 happened to happen when the United States announced that inflation had reached 30-year high, But after worries about the Chinese real estate developer Evergrande, sentiment quickly reversed Defaulted on its loan. This seems to have affected the wider market structure.

Traders are still afraid of stablecoin regulation

After the initial correction phase, regulators and policymakers put relentless pressure on stablecoin issuers.First arrived at VanEck’s position Bitcoin ETF rejected Issued by the US Securities and Exchange Commission on November 12. Denial is directly related to the notion that the Tether (USDT) stablecoin is insolvent and concerns about Bitcoin price manipulation.

On December 14, the Bank of America, Housing and Urban Affairs Committee held The hearing on stablecoins Focusing on consumer protection and its risks, on December 17, the US Financial Stability Supervisory Commission (FSOC) stated Concerns about the adoption of stablecoins And other digital assets. The report stated: “The committee recommends that state and federal regulators review existing regulations and tools that can be applied to digital assets.”

Deteriorating investor sentiment is reflected in the premium of CME’s Bitcoin futures contract. This indicator measures the difference between long-term futures contracts and current spot prices in the regular market.

Whenever the indicator disappears or becomes negative, this is a worrying red flag. This situation is also called an inverse spread, and it indicates bearish sentiment.

Comparison of Bitcoin CME’s 2-month forward contract premium with Coinbase/USD. Source: TradingView

These fixed-month contracts usually have a slight premium, which indicates that the seller is asking for more money to extend the settlement time. In a healthy market, futures should be traded at an annualized premium of 0.5% to 2%. This situation is called a futures premium.

Please note how the indicator fell below the “neutral” range after December 9th, as Bitcoin was trading at less than $49,000. This shows that institutional traders are showing a lack of confidence, even though it is not yet a bearish structure.

Top traders are increasing bullish bets

The data provided by the exchange highlights the long to short net positions of traders. By analyzing the positions of each client’s spot, perpetual contracts, and futures contracts, we can better understand whether professional traders tend to be bullish or bearish.

There are occasional differences in methodologies between different exchanges, so viewers should focus on changes rather than absolute numbers.

Bitcoin long-short ratio of top traders on the exchange. Source:

Although Bitcoin has pulled back 19% since December 3, top traders from Binance, Huobi, and OKEx have increased their leveraged long positions. More precisely, Binance is the only exchange where the long-short ratio of top traders has decreased slightly. The number changed from 1.09 to 1.03. However, OKEx traders increased the bullish bet from 1.51 to 2.91 within two weeks, offsetting this effect.

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The lack of a premium on the CME 2-month futures contract should not be considered a “red alert” because Bitcoin is currently testing the resistance level of $46,000, which is the lowest daily closing price since October 1. In addition, top traders on derivatives exchanges increased their long positions despite falling prices.

Regulatory pressure may not be lifted in the short term, but at the same time, the US government is powerless to curb the issuance and trading of stablecoins. These companies can move outside the United States and operate using dollar-denominated bonds and assets instead of cash. For this reason, there is almost no sense of panic in the market at present, and data shows that professional traders are buying on dips.

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