Značka: basis rate

Crypto regulation is coming, but Bitcoin traders are still buying the dip

Looking at the Bitcoin chart from a weekly or daily perspective presents a bearish outlook and it’s clear that (BTC) price has been consistently making lower lows since hitting an all-time high at $69,000.Bitcoin/USD on FTX. Source: TradingViewCuriously, the Nov. 10 price peak happened right as the United States announced that inflation has hit a 30-year high, but, the mood quickly reversed after fears related to China-based real estate developer Evergrande defaulting on its loans. This appears to have impacted the broader market structure. Traders are still afraid of stablecoin regulation This initial corrective phase was quickly followed by relentless pressure from regulators and policy makers on stablecoin issuers. First came VanEck’s spot Bitcoin ETF rejection by the U.S. Securities and Exchange Commission on Nov. 12. The denial was directly related to the view that Tether’s (USDT) stablecoin was not solvent and concerns over Bitcoin’s price manipulation.On Dec. 14, the U.S. Banking, Housing and Urban Affairs Committee held a hearing on stablecoins focused on consumer protection and their risks and on Dec. 17, the U.S. Financial Stability Oversight Council (FSOC) voiced its concern over stablecoin adoption and other digital assets. “The Council recommends that state and federal regulators review available regulations and tools that could be applied to digital assets,” said the report.The worsening mood from investors was reflected in the CME’s Bitcoin futures contracts premium. The metric measures the difference between longer-term futures contracts to the current spot price in regular markets. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.Bitcoin CME 2-month forward contract premium versus Coinbase/USD. Source: TradingViewThese fixed-month contracts usually trade at a slight premium, indicating that sellers are requesting more money to withhold settlement for longer. Futures should trade at a 0.5% to 2% annualized premium in healthy markets, a situation known as contango.Notice how the indicator moved below the “neutral” range after Dec. 9 as Bitcoin traded below $49,000. This shows that institutional traders are displaying a lack of confidence, although it is not yet a bearish structure.Top traders are increasing their bullish betsExchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.Exchanges top traders Bitcoin long-to-short ratio. Source: Coinglass.comDespite Bitcoin’s 19% correction since Dec. 3, top traders at Binance, Huobi, and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders’ long-to-short ratio. The figure moved from 1.09 to 1.03. However, this impact was more than compensated by OKEx traders increasing their bullish bets from 1.51 to 2.91 in two weeks.Related: SEC commissioner Elad Roisman will leave by end of JanuaryThe lack of a premium in CME 2-month future contracts should not be considered a ‘red alert’ because Bitcoin is currently testing the $46,000 resistance, its lowest daily close since Oct. 1. Furthermore, top traders at derivatives exchanges have increased their longs despite the price drop.Regulatory pressure probably won’t lift up in the short term, but at the same time, there’s not much that the U.S. government can do to suppress stablecoin issuance and transactions. These companies can move outside of the U.S. and operate using dollar-denominated bonds and assets instead of cash. For this reason, currently, there is hardly a sense of panic present in the market and from data shows, pro traders are buying the dip.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Data shows pro traders are currently more bullish on Ethereum than Bitcoin

Most traders have noticed that Ether (ETH) price has seriously outperformed Bitcoin (BTC) for months now and the ETH/BTC ratio has rallied more than 230% in 2021 and recently hit a new high at 0.089 BTC on Dec. 9. ETH/BTC pair at Coinbase. Source: TradingViewTo put things in perspective, Ether’s $490 billion market capitalization currently represents 54% of Bitcoin’s $903 billion. This ratio finished 2020 at a mere 15%, so it is safe to conclude that some ‘flippening’ has occurred. It might still be far from what Ethereum-maximalists imagined, but it is still quite a respectable run.Instead of analyzing the rationale for the move or, even worse, predicting the outcome based on some loose expectations, analysts should explore the market structure of each coin individually. For example, is the futures’ market premium facing a similar trend on both coins and how does the pro traders’ long-to-short ratio compare? These are the most relevant metrics to determine whether a movement has the strength to continue.The futures premium favors EtherQuarterly futures are the whales and arbitrage desks’ preferred instruments but because of their settlement date and the price difference from spot markets, they might seem complicated for retail traders. However, these quarterly contracts’ most notable advantage is the lack of a fluctuating funding rate.These fixed-month instruments usually trade slightly above spot market prices, indicating that sellers are requesting more money to withhold settlement longer. Consequently, futures should trade at a 5% to 15% annualized premium in healthy markets. This situation is known as “contango” and is not exclusive to crypto markets.Bitcoin and Ether futures basis. Source: Laevitas.chAfter comparing both charts, we can see that Bitcoin futures trade at an average 2.6% annualized premium for March 2022 and 4.4% for June 2022. This compares to Ether’s 2.9% and 5%, respectively. As a result, it becomes clear that whales and arbitrage desks are demanding a larger premium on Ether and this is a bullish indicator.Bitcoin’s long-to-short ratio declinedTo effectively measure how professional traders are positioned, investors should monitor the top traders’ long-to-short ratio at leading crypto exchanges. This metric provides a broader view of traders’ effective net position by gathering data from multiple markets.It is worth noting that exchanges gather data on top traders differently because there are multiple ways to measure clients’ net exposure. Therefore, any comparison between different providers should be made on percentage changes instead of absolute numbers.Bitcoin top traders long-to-short ratio. Source: CoinglassThe long-to-short ratio for top Bitcoin traders currently stands at a 1.21 ratio average, down from the 1.39 on Dec. 5. Compared to the 1.59 figure from two weeks ago, this signals that buyers (longs) reduced their exposure by 24%. Once again, the absolute number has less importance than the overall change in the time frame.Ether top traders long-to-short ratio. Source: CoinglassMeanwhile, Ether whales and arbitrage desks showed a positive sentiment change from Dec. 5 after the long-to-short moved to 1.16 from 1.0. When comparing the average data from Nov. 25, top Ether traders’ long-to-short have been cut by 20% from 1.43.Data shows Ether traders are more confident than Bitcoin tradersCurrent derivatives data favors Ether because the asset currently shows a higher futures basis rate. Furthermore, the improvement on the top traders’ long-to-short since Oct. 5 signals confidence at a delicate period when ETH price is down 16% from its $4,870 all-time high.Bitcoin investors may be lacking confidence as its price stands 31% below the $69,000 all-time high on Nov. 10. There’s no way to know whether this is a cause or consequence. Still, judging by the futures premium and long-to-short data Ether seems to have enough momentum to keep outperforming.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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