It may seem like it was an eternity and a day ago when the price of Bitcoin (BTC) was trading below $18,000, but it was actually 40 days ago. As a general rule, cryptocurrency traders tend to have a short-term memory and, more importantly, they place less value on negative news during bull runs. A great example of this behavior is the 15% rise in BTC since February 13, despite the constant stream of bad news in the cryptocurrency market.
For example, on February 13, the New York State Department of Financial Services (NYDFS) ordered Paxos to “stop minting” Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. Similarly, Reuters reported on Feb. 16 that more than $400 million was transferred from a bank account controlled by Binance.US to trading firm Merit Peak, which is allegedly an independent entity also controlled by Binance CEO Changpeng Zhao.
The wave of regulatory pressure continued on Feb. 17 when the US Securities and Exchange Commission (SEC) announced a $1.4 million settlement to former NBA player Paul Pierce for allegedly promoting “false and misleading claims” about EthereumMax tokens on social networks. networks.
None of these adverse developments were able to dampen investor optimism after weak economic data showed that the US Federal Reserve (Fed) has less room to further raise interest rates. Philadelphia’s FED Manufacturing Survey showed a 24% decline as of Feb. 16, with U.S. housing starts up 1.31 million from the previous month, below the expected 1.36 million.
Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.
Demand for stablecoins in Asia remains “modest”
Traders should look at the USD Coin (USDC) premium to gauge the demand for cryptocurrencies in Asia. The index measures the difference between peer-to-peer stablecoin transactions in China and the US dollar.
Excessive demand to buy crypto could put pressure on the indicator above fair value at 104%. On the other hand, the stablecoin market supply is crowded during bear markets, resulting in a 4% discount or higher.
The USDC premium is currently at 2.7%, unchanged from the previous week on Feb. 13, indicating modest demand for buying stablecoins in Asia. However, the positive indicator shows that retail traders weren’t spooked by the recent flood of news or Bitcoin’s deviation from $25,000.
Futures Premium Shows Bullish Momentum
Retail traders generally avoid quarterly futures due to their price differential with the spot markets. Meanwhile, professional traders prefer these instruments because they prevent fluctuations in funding rates in a perpetual futures contract.
The annual premium on 2-month futures should be between +4% and +8% in healthy markets to cover costs and associated risks. Thus, when futures trade below this range, it is indicative of leverage buyers being unsure. This is usually a bearish indicator.
The chart shows bullish momentum as the premium for Bitcoin futures broke the neutral 4% threshold on February 16th. This move represents a return to the neutral bullish sentiment that prevailed until early February. As a result, it is clear that professional traders feel more comfortable trading Bitcoin above $24,000.
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Limited impact of regulatory action is a positive sign
While Bitcoin’s 15% price gain since February 13th is encouraging, the news flow from regulators has been mostly negative. Investors are encouraged by the decline in the US Federal Reserve’s ability to rein in the economy and curb inflation. Therefore, one can understand how these bearish events failed to break the spirit of cryptocurrency traders.
As a result, the correlation with 50-day S&P 500 futures remains high at 83%. Correlation statistics above 70% indicate that asset classes are moving in tandem, which means that the macroeconomic scenario has likely set the overall trend.
For now, both retail and professional traders are showing signs of confidence in line with stablecoin premium and BTC futures performance. Therefore, the odds are in favor of a continuation of the rally, since the absence of price correction is usually characteristic of bull markets, despite the presence of bearish events, especially regulatory ones.
This article does not contain investment advice or recommendations. Every investment and trading step involves risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed here are those of the authors only and do not necessarily reflect or represent the views and opinions of Cryptooshala.
Credit : cointelegraph.com
