Futures

Bitcoin returns to $25K as Credit Suisse bailout precedes EU rate hike move

A day of important macroeconomic news in the U.S. and Europe sees BTC price action circling the all-important $25,000 zone.

Bitcoin (BTC) rebounded for a fresh challenge of $25,000 on March 16 ahead of a key interest rate decision in Europe.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

Credit Suisse stock up 40% after “decisive action”

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD gaining almost $1,000 versus overnight lows of $24,229 on Bitstamp.

The pair remained buoyant as news hit that Switzerland’s central bank was due to inject $50 billion Swiss francs ($53.8 billion) into the embattled Credit Suisse, shares of which added 40% on the day.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” CEO Ulrich Koerner stated in a press release.

While averting potential catastrophe, the move came in for criticism ahead of a day full of economic maneuvers in Europe and the United States.

“When Swiss banks need bailouts to survive it’s probably a decent time to think about buying,” trader, analyst and podcast host Scott Melker, known as “The Wolf of all Streets,” commented.

Uncertainty over European economic policy remained, with the European Central Bank (ECB) due to decide on how much interest rates should rise next.

Just like the Federal Reserve in the U.S., the ECB is caught between alleviating bank stress and keeping a lid on inflation. The day’s hike was previously due to be 50 basis points.

Twitter macro analytics account Tedtalksmacro noted that Bitcoin might already fall behind equities markets based on the previous day’s performance.

Strong moves from the 2-year yield + equities during the US cash session yesterday. Is #Bitcoin lagging TradFi again? pic.twitter.com/6xEBQansVO

— tedtalksmacro (@tedtalksmacro) March 16, 2023

In the U.S., the topic of interest was jobless claims, with analysts hoping for an overshoot of expectations to bolster the chances of the Fed pivoting on its own rate hike program.

“We are looking for a hot Jobless reports to start plotting an uptrend in Jobless claims. Getting it would increase the probability of the FED pausing rate hikes this month,” on-chain monitoring resource Material Indicators wrote in part of the Twitter commentary.

Cointelegraph contributor Michaël van de Poppe, founder and CEO of trading firm Eight, said the jobs data constituted a “big day.”

“Last week we’ve seen the largest jump since October, would be wondering whether we’ll be seeing continuation of that rise, which might mean we’ll have higher unemployment numbers,” he added.

Analysts see encouraging Bitcoin market strength

With that, traders were biding their time to gauge the impact of macroeconomic shifts, with BTC/USD still in a narrower trading range.

“Same update as I was looking at yesterday guys,” popular trader Crypto Tony wrote in his latest update on the day.

“$23,400 stop loss on my existing long position, and looking for shorts if we begin to lose the $22,600 support zone Until the sort of stuck in a sideways motion.“

*BTC/USD annotated chart. Source: Crypto Tony/ Twitter*

“BTC Grinding up while spot premium is increasing,” a cautiously optimistic Daan Crypto Trades noted while eyeing derivatives data.

“Funding rates already flipping below baseline or into the negative across the board. Looks healthy.“

*BTC/USD derivatives data. Source: Daan Crypto Trades/ Twitter*

Popular commentator Byzantine General meanwhile entertained the prospect of future BTC price dips being “very shallow.“

“Price keeps hugging upper range, perps basis already completely reset, futs basis still hovering around zero and there are lots of spot bids that don’t seem to be going anywhere,” he agreed.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum price action and derivatives data confirm bears are currently in control

Investors are unwilling to add long positions, as the Shanghai fork is expected to unlock a significant amount of ETH over a short period.

The price of Ether (ETH) declined 6% between March 2 and 3, followed by tight-range trading near $1,560. Still, analyzing a wider time frame provides no clear trend, as its chart can point to a descending channel or a slightly longer seven-week bullish pattern.

*Ether (ETH) price index in USD, 1-day. Source: TradingView*

Ether’s recent lack of volatility can be partially explained by the upcoming Shanghai hard fork, an implementation aimed at allowing ETH staking withdrawals. Those participants were each required to lock 32 ETH on the Beacon Chain to support the network consensus protocol.

After a series of delays, typical for changes in the production environment, the Shanghai Capella upgrade — also known as Shapella — is expected for early April, according to Ethereum core developer and project coordinator Tim Beiko. The Goerli testnet upgrade on March 14 will be the final rehearsal for the Shanghai hard fork before it is rolled out on the mainnet.

Recession risks increase, favoring ETH bears

On the macroeconomic front, United States Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on March 7. Powell stated that interest rates will likely rise higher than anticipated after “the latest economic data have come in stronger than expected.”

Evidence points to the Fed lagging behind the inflation curve, boosting the odds of harder-than-expected interest rate increases and asset sales by the monetary authority. For instance, an inflation “surprise” index from Citigroup rose in February for the first time in more than 12 months.

For risk assets, including cryptocurrencies, a more substantial move by the Fed typically implies a bearish scenario, as investors seek shelter in fixed income and the U.S. dollar. This shift becomes more pronounced in a recessionary environment, which many speculate is either coming or already here.

The regulatory environment is adding additional pressure for cryptocurrency firms, especially after U.S. Press Secretary Karine Jean-Pierre said the White House has noted that the crypto-friendly bank Silvergate had “experienced significant issues” in recent months.

Let’s look at Ether derivatives data to understand if the $1,560 level is likely to become a support or resistance.

ETH derivatives show reduced demand for longs

The annualized three-month futures premium should trade between 5% and 10% in healthy markets to cover costs and associated risks. However, when the contract trades at a discount (known as “backwardation”) versus traditional spot markets, it shows a lack of confidence from traders and is deemed a bearish indicator.

*Ether 3-month futures annualized premium. Source: Laevitas*

The chart above shows that derivatives traders became slightly uncomfortable as the Ether futures premium (on average) moved to 3.1% on March 7, down from 4.9% one week prior. More importantly, the indicator became more distant from the 5% neutral-to-bullish mark.

Still, the declining demand for leverage longs (bulls) does not necessarily translate to an expectation of adverse price action. Consequently, traders should analyze Ether’s options markets to understand how whales and market makers are pricing the odds of future price movements.

The 25% delta skew is a telling sign th market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew metric below -10%, meaning the bearish put options are in less demand.

*Ether 30-day options 25% delta skew: Source: Laevitas*

The delta skew moved above the bearish 10% threshold on March 4, signaling stress from professional traders. A brief improvement happened on March 7, although the metric continues to flirt with bearish expectations as options traders place higher costs on protective put options.

Investors basing their decisions on fundamentals will likely look to the first couple of weeks following the Shanghai upgrade to measure the potential impact of the ETH unlock. Ultimately, options and futures markets signal that pro traders are less inclined to add long positions, giving higher odds for $1,560 becoming a resistance level in the coming weeks.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin bulls ignore recent regulatory FUD by aiming to flip $25K to support

Bitcoin’s upward momentum can continue, according to Asian stablecoin demand and the BTC futures premium.

It might seem like forever ago that Bitcoin (BTC) was trading below $18,000, but in reality, it was 40 days ago. Cryptocurrency traders tend to have a short-term memory, and more importantly, they attribute less importance to negative news during bull runs. A great example of this behavior is BTC’s 15% gain since Feb. 13 despite a steady flow of bad news in the crypto market.

For instance, on Feb. 13, the New York State Department of Financial Services ordered Paxos to “cease minting” the Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. Similarly, Reuters reported on Feb. 16 that a bank account controlled by Binance.US moved over $400 million to the trading firm Merit Peak — which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao.

The regulatory pressure wave continued on Feb. 17 as the United States Securities and Exchange Commission announced a $1.4-million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” regarding EthereumMax (EMAX) tokens on social media.

None of those adverse events were able to break investors’ optimism after weak economic data signaled that the U.S. Federal Reserve has less room to keep raising interest rates. The Philadelphia Fed’s Manufacturing Index displayed a 24% decrease on Feb. 16, and U.S. housing starts increased by 1.31 million versus the previous month, which is softer than the 1.36 million expectation.

Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand remains “modest”

Traders should refer to the USD Coin (USDC) premium to measure the demand for cryptocurrency in Asia. The index measures the difference between China-based peer-to-peer stablecoin trades and the U.S. dollar.

Excessive cryptocurrency buying demand can pressure the indicator above fair value at 104%. On the other hand, the stablecoin’s market offer is flooded during bearish markets, causing a 4% or higher discount.

*USDC peer-to-peer vs. USD/CNY. Source: OKX*

Currently, the USDC premium stands at 2.7%, which is flat versus the previous week on Feb. 13 and indicates modest demand for stablecoin buying in Asia. However, the positive indicator shows that retail traders were not frightened by the recent newsflow or Bitcoin’s rejection at $25,000.

The futures premium shows bullish momentum

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.

*Bitcoin 2-month futures annualized premium. Source: Laevitas*

The chart shows bullish momentum, as the Bitcoin futures premium broke above the 4% neutral threshold on Feb. 16. This movement represents a return to a neutral-to-bullish sentiment that prevailed until early February. As a result, it’s clear that pro traders are becoming more comfortable with Bitcoin trading above $24,000.

The limited impact of regulatory action is a positive sign

While Bitcoin’s 15% price gain since Feb. 13 is encouraging, the regulatory newsflow has been primarily negative. Investors are excited by the U.S. Fed‘s decreased ability to curb the economy and contain inflation. Hence, one can understand how those bearish events could not break cryptocurrency traders’ spirit.

Ultimately, the correlation with the S&P 500 50-day futures remains high at 83%. Correlation stats above 70% indicate that asset classes are moving in tandem, meaning the macroeconomic scenario is likely determining the overall trend.

At the moment, both retail and pro traders are showing signs of confidence, according to the stablecoin premium and BTC futures metrics. Consequently, the odds favor a continuation of the rally because the absence of a price correction typically marks bull markets despite the presence of bearish events, especially regulatory ones.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price rally to $25K followed by total crypto market cap retest of the $1.13T resistance

This week’s bearish regulatory actions and rumors were not strong enough to suppress investors’ appetite for cryptocurrency.

The total crypto market capitalization rejected at $1.13 trillion on Feb. 16, but there was no change in the month-long ascending channel structure. More importantly, this level represents a 43% gain in 2023, which is far from the $3 trillion level achieved in November 2021. Still, the current recovery is notable.

*Total crypto market cap in U.S. dollars, 1-day. Source: TradingView*

As shown above, the ascending channel initiated in mid-January has left some room for a 10% correction down to $1 trillion without breaking the bullish formation.

Investors reacted positively to the 5.6% year-on-year U.S. Consumer Price Index inflation increase on Feb. 14 and the 3% retail sales monthly growth on Feb. 15. Bitcoin (BTC) had the biggest positive impact on the total crypto capitalization as its price gained 12.5% on the week.

One area of concern is a Feb. 16 story on Binance.US financial transactions to Merit Peak, a trading firm managed by CEO Changpeng Zhao. Interestingly, Reuters reported that a Binance.US spokesperson said Merit Peak was “neither trading nor providing any kind of services on the Binance.US platform.”

The 10.1% weekly increase in total market capitalization was held back by the modest 1.8% gains from BNB (BNB) and the XRP (XRP) 2.5% price increase. On the other hand, only three out of the top 80 cryptocurrencies finished the week with negative performances.

*Weekly winners and losers among the top 80 coins. Source: Messari*

Decentralized storage solution Filecoin (FIL) gained 59% and Internet Computer (ICP) soared 52% as Bitcoin blockchain demand for nonfungible token (NFT) inscription vastly increased the block space.

GMX rallied 34% as the protocol received $5 million in transaction fees on a single day.

Lido DAO’s LDO gained 34% as stakers evaluated proposals to manage the 20,300 Ether (ETH) held by the corporate treasury.

Leverage demand is balanced despite the generalized rally

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

*Perpetual futures accumulated 7-day funding rate on Feb. 17. Source: Coinglass*

The seven-day funding rate was close to zero for Bitcoin and Ether, meaning the data points to a balanced demand between leverage longs (buyers) and shorts (sellers).

Interestingly, BNB is no longer a top six cryptocurrency ranked by futures open interest, as investors’ demand for Polygon’s MATIC (MATIC) markets increased by 70% in February.

The options put/call ratio remains optimistic

Traders can gauge the market’s overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and is therefore bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.

*BTC options volume put-to-call ratio. Source: Laevitas*

Even though Bitcoin’s price failed to break the $25,000 resistance, the demand for bullish call options has exceeded the neutral-to-bearish puts since Feb. 14.

Presently, the put-to-call volume ratio nears 0.40 as the options market is more strongly populated by neutral-to-bullish strategies, favoring call (buy) options by 2x.

From a derivatives market perspective, there are no signs of demand from short sellers, while leverage indicators show bulls are not using excessive leverage. Ultimately, the odds favor those betting that the $1.13 trillion total market cap resistance will break, opening room for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price derivatives look a bit overheated, but data suggests bears are outnumbered

Bullish BTC traders are using excessive leverage, but bears’ reluctance to fight back could extend the current Bitcoin price rally.

Bitcoin (BTC) price rallied over 12% on Feb. 15, marking the highest daily close in more than six months. Curiously, the movement happened while gold reached a 40-day low at $1,826, indicating some potential shift in investors’ risk assessment for cryptocurrencies.

A stronger-than-expected U.S. inflation report on Feb. 14 showed consumer prices rising 5.6% year-on-year, followed by data showing resilient consumer demand, causing traders to rethink Bitcoin’s scarcity value. U.S. retail sales increased by 3% in January over the previous month — the highest gain in almost two years.

On-chain data indicates that the recent gains can be traced back to a mysterious institutional investor that started buying on Feb. 10. According to Lookonchain’s data, nearly $1.6 billion in funds have flowed into the crypto market between Feb. 10 and Feb. 15. The analysis showed that three notable USD Coin (USDC) wallets sent out funds to various exchanges around the same time.

More importantly, news emerged that the Binance exchange is preparing to face penalties and settle eventual outstanding regulatory and law-enforcement investigations in the U.S., according to a Feb. 15 Wall Street Journal report. The exchange’s chief strategy officer, Patrick Hillmann, added that Binance was “highly confident and feeling really good about where those discussions are going.”

Let’s look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.

Bitcoin margined longs entered the “FOMO” range

Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only bet against (short) the cryptocurrency. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders’ margin lending ratio increased between Jan. 13 and Jan. 15, signaling that professional traders added leverage long positions as Bitcoin price broke above the $23,500 resistance.

One might argue that the demand for borrowing stablecoins for bullish positioning is excessive as a stablecoin/BTC margin lending ratio above 30 is unusual. However, traders tend to deposit more collateral after a few days or weeks, causing the indicator to exit the FOMO level.

Options traders remain skeptical of a sustained rally

Traders should also analyze options markets to understand whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

Notice that the 25% delta skew has been neutral for the past two weeks, signaling equal pricing for bullish and bearish strategies. This reading is highly unusual considering Bitcoin gained 16.2% from Jan. 13 to Jan. 16 and typically, one would expect excessive bullishness causing the skew to move below negative 10.

One thing is for sure, a lack of bearish sentiment is present in futures and options markets. Still, there are some concerning data on excessive margin demand for leverage buying, although it is too soon to call it worrisome.

The longer Bitcoin remains above $24,000, the more comfortable those pro traders become with the current rally. Moreover, bears using futures markets had $235 million liquidated between Jan. 15 and Jan. 16, resulting in a decreasing appetite for bearish bets. Hence, the derivatives markets continue to favor bullish momentum.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum’s $1.5K support weakens as ETH traders turn slightly bearish

ETH derivatives data shows bulls becoming less inclined to defend the current price level, creating an opportunity for more downside.

The price of Ether (ETH) declined 10.2% between Jan. 8 and Jan. 10, and has since been range trading near the $1,500 level. More importantly, on a broader time frame, Ether is down 52.5% in twelve months, which partially explains why derivatives metrics were somewhat neutral after Ether’s failed attempt to break $1,700 on Feb. 8.

Currently, investors’ biggest concerns are the U.S. Securities and Exchange Commission’s lawsuits and enforcement actions against crypto firms, including Kraken’s tanking its staking-as-a-service program and PayPal reportedly pausing its stablecoin project due to regulatory concerns.

A crackdown by the SEC on crypto staking is expected to have unintended consequences for decentralized finance, according to Jacob Blish, the head of business development at Lido DAO. Blish joined a growing number of people in the crypto industry calling for transparency in crypto sector regulation.

On the bright side, Ethereum developers announced the pre-launch of the Shanghai upgrade on the Zhejiang testnet. According to a blog post on Feb. 10, the transition is required to enable withdrawals from validators’ staking positions. The Zhejiang test network is the first of three testnets that simulate Shanghai, which is expected to go live in March, although a specific date has not been released.

Let’s look at Ether derivatives data to understand if the $1,700 price rejection has impacted crypto investors’ sentiment.

ETH futures show slowing demand for leverage longs

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The three-month futures annualized premium should trade between 4% to 8% in healthy markets to cover costs and associated risks. However, when futures trade at a discount versus regular spot markets, it shows a lack of confidence from leverage buyers, which is a bearish indicator.

The above chart shows that derivatives traders are more bearish because the Ether futures premium moved below the 4% threshold. Consequently, bears can celebrate that the indicator failed to display a modest premium even as ETH tested $1,700 on Feb. 8.

The absence of demand for leverage longs does not necessarily translate to an expectation of adverse price action. Hence, traders should analyze Ether’s options markets to understand how whales and market makers are pricing the odds of future price movements.

A key options risk metric flirted with the bearish sentiment

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

*Ether 30-day options 25% delta skew: Source: Laevitas.ch*

The delta skew flirted with the bearish 10% level on Feb. 14, signaling stress from professional traders. That is a stark contrast from late January when the 25% skew index hovered near 2% — indicating similar upside and downside risks.

Ultimately, both options and futures markets point to pro traders moving to a neutral-to-bearish sentiment, displaying moderate discomfort after the $1,700 price rejection.

Consequently, the odds favor Ether bears because the hostile regulatory environment tends to amplify the adverse effects of FUD — whether or not it directly impacts the Ethereum network’s adoption and use cases.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin price clings to $22K as investors digest the recent SEC actions and CPI report

Bitcoin price recaptured the $22,000 level, but pending regulatory action against stablecoins and the Valentine’s Day CPI report are front of mind for many investors.

After 20 days of holding the $22,500 support, Bitcoin (BTC) price finally broke down on Feb. 9. Bullish traders had placed their hope on a sustained rally, but this has been replaced by a tight trading range with resistance at $22,000.

The downtrend is even more concerning since the S&P 500 is trading near its highest level in six months, yet the wider crypto market continues to correct.

Regulatory pressure, mainly in the United States, can explain Bitcoin’s recent lackluster performance. For starters, on Jan. 9, Kraken exchange reached an agreement with the United States Securities and Exchange Commission (SEC) to stop offering staking services to U.S. clients. The crypto also firm agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.

On Feb. 10, cryptocurrency lending firm Nexo Capital announced that its yield-bearing Earn Interest product for U.S. customers would be shut down in April. Nexo pointed to its $45 million settlement with the SEC and other regulators on Jan. 19 as the reason for the service halting.

U.S. SEC Chairman Gary Gensler issued a warning to crypto companies on Jan. 10 to “come in and follow the law,” explaining that their business models were “rife with conflict” and claimed they needed to “disentangle” bundled products. Gensler said that such companies are required to register with the SEC.

Another blow to crypto market sentiment came on Feb. 13 after Paxos Trust Company announced the termination of its relationship with Binance for the branded U.S. dollar-pegged stablecoin BUSD amid an ongoing probe by New York state regulators.

On Feb. 14, the U.S. will report January’s Consumer Price Index data, which will reveal whether price increases have been subdued after the central bank’s interest rate hikes. Typically, lower inflation rates would be celebrated as they reduce the pressure on the U.S. Federal Reserve to curb the economy. But on the other hand, lower consumer demand is likely to pressure corporate earnings, which could trigger the recessionary environment even further.

Let’s look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand weakens, but there are signs of resilience

An excellent way to measure the overall demand for cryptocurrency in Asia is the USD Coin (USDC) premium, which is the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 104%, and during bearish markets, the stablecoin’s market offer is flooded, causing a 4% or higher discount.

Currently, the USDC premium stands at 2%, down from 3% on Feb. 6, indicating declining demand for stablecoin buying in Asia. However, the indicator remains positive, indicating moderate buying activity from retail traders despite the 6% Bitcoin price decline in the period.

Still, one should monitor BTC futures markets to understand how professional traders are positioned.

The futures premium abandoned the neutral-to-bullish range

*Bitcoin 3-month futures annualized premium. Source: Laevitas*

The three-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.

The chart shows declining momentum as the Bitcoin futures premium broke below the 4% neutral threshold on Feb. 8. This movement represents a return to a neutral-to-bearish sentiment that prevailed until mid-January.

Crypto traders are expecting further pressure from regulators

While Bitcoin’s 9% drop since the failed $24,000 resistance test on Feb. 2 seems discouraging, the overwhelming negative regulatory newsflow has caused professional traders to become risk averse.

At the same time, the traditional market looks for further data before adding bullish positions. For example, investors would rather wait until the U.S. Federal Reserve displays conviction on the end of the interest rate increase movement.

Currently, the odds favor bears as regulatory uncertainty provides a favorable environment for fear, uncertainty and doubt — even if the news is unrelated to Bitcoin and focused on crypto exchanges and stablecoins.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Total crypto market cap rises above $1T, and data suggests more upside is in store

Bad news continues to dominate crypto media headlines but Bitcoin and the wider market appear to not care.

Despite the recent negative crypto and macroeconomic newsflow, the total cryptocurrency market capitalization broke above $1 trillion on Jan. 21. An encouraging sign is that derivatives metrics are not showing increased demand from bearish traders at the moment.

*Total crypto market cap in USD, 1-day. Source: TradingView*

Bitcoin (BTC) price gained 8% on the week, stabilizing near the $23,100 level at 18:00 UTC on Jan. 27 as the markets weighed the potential impact of Genesis Capital’s bankruptcy on Jan. 19.

One area of concern is Genesis Capital’s largest debtor is Digital Currency Group (DCG), which happens to be its parent company. Consequently, Grayscale funds management could be at risk, so investors are unsure if the Grayscale Bitcoin Trust (GBTC) assets could face liquidation. The investment vehicle currently holds over $14 billion worth of Bitcoin positions for its holders.

A United States appeals court is set to hear the arguments relating to Grayscale Investment’s lawsuit against the Securities and Exchange Commission (SEC) on March 8. The fund manager questioned the SEC’s decision to deny their asset-backed exchange-traded fund (ETF) launch.

Regulatory concerns also negatively impacted the markets after South Korean prosecutors requested an arrest warrant for Bithumb exchange owner Kang Jong-Hyun. On Jan. 25, the Financial Investigation 2nd Division of the Seoul Southern District Prosecutor’s Office sentenced Kang and two Bithumb executives on charges of conducting fraudulent illegal transactions.

The 7% weekly increase in total market capitalization was held back by Ether’s (ETH) 0.3% negative price move. Still, the bullish sentiment significantly impacted altcoins, with 11 of the top 80 coins gaining 18% or more in the period.

Aptos (APT) gained 91% after the smart contract network total value locked (TVL) reached a record-high $58 million, fueled by PancakeSwap DEX.

Fantom (FTM) rallied 50% after the announcement of its new database system, Carmen, and a new Fantom Virtual Machine, Tosca.

Optimism (OP) faced 21% gains after a sharp increase in transaction volumes during an NFT incentive program called Optimism Quest.

Leverage demand slightly favors bulls

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

*Perpetual futures accumulated 7-day funding rate on Jan. 27. Source: Coinglass*

The 7-day funding rate was positive for Bitcoin and Ethereum, meaning the data points to slightly higher demand for leverage longs (buyers) versus shorts (sellers). Still, a 0.25% weekly funding cost is not enough to discourage leverage buyers.

Interestingly, Aptos was the only exception as the altcoin presented a negative 0.6% weekly funding cost — meaning short sellers were paying to keep their positions open. This movement can be explained by the 91% rally in 7 days and it suggests that sellers expect some sort of technical correction.

The options put/call ratio shows no signs of fear

*BTC options volume put-to-call ratio. Source: laevitas.ch*

Even though Bitcoin’s price failed to break the $23,300 resistance, the demand for bullish call options has exceeded the neutral-to-bear puts since Jan. 6.

Presently, the put-to-call volume ratio stands near 0.50 as the options market is more strongly populated by neutral-to-bullish strategies, favoring call (buy) options by 50%.

Derivatives markets point to further upside potential

After the third consecutive week of gains, which totals 40% year-to-date when excluding stablecoins, there are no signs of demand from short sellers. More importantly, leverage indicators show bulls are not using excessive leverage.

Derivatives markets point to further upside potential and even if the market revisits the $950 billion market capitalization from Jan. 18, there is no reason for panic. Currently, Bitcoin option markets show whales and market makers favoring the neutral-to-bullish strategies.

Ultimately, the odds favor those betting that the $1 trillion total market cap will hold, opening room for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Total crypto market cap rises above $1T — data suggests more upside is in store

Bad news continues to dominate crypto media headlines, but Bitcoin and the broader market appear not to care.

Bitcoin (BTC) price gained 8% this week, stabilizing near the $23,100 level at 18:00 UTC on Jan. 27 as the markets weighed the potential impact of Genesis Global Capital’s bankruptcy on Jan. 19.

One area of concern is Genesis Capital’s largest debtor, the Digital Currency Group, its parent company. Consequently, Grayscale funds management could be at risk, with investors unsure if Grayscale Bitcoin Trust assets could face liquidation. The investment vehicle currently holds over $14 billion worth of Bitcoin positions for its holders.

Aptos (APT) gained 91% after the smart contract network total value locked reached a record-high $58 million, fueled by the PancakeSwap decentralized exchange.

Fantom (FTM) rallied 50% after the announcement of its new database system, Carmen and a new Fantom Virtual Machine, Tosca.

Optimism (OP) saw 21% gains after a sharp increase in transaction volumes during a nonfungible token incentive program called Optimism Quest.

Leverage demand slightly favors bulls

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

Interestingly, Aptos was the only exception as the altcoin presented a negative 0.6% weekly funding cost, with short sellers paying to keep their positions open. This movement can be explained by the 91% rally in seven days and it suggests that sellers expect some sort of technical correction.

The options put/call ratio shows no signs of fear

Even though Bitcoin’s price failed to break the $23,300 resistance, the demand for bullish call options has exceeded the neutral-to-bear puts since Jan. 6.

Presently, the put-to-call volume ratio stands near 0.50 as the options market is more strongly populated by neutral-to-bullish strategies, favoring call (buy) options by 50%.

Derivatives markets point to further upside potential

Derivatives markets point to further upside potential. Even if the market revisits the $950 billion market capitalization from Jan. 18, there is no reason for panic. Currently, Bitcoin option markets show whales and market makers favoring the neutral-to-bullish strategies.

Ultimately, the odds favor those betting that the $1 trillion total market cap will hold, opening room for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Stablecoin data points to ‘healthy appetite’ from bulls and possible Bitcoin rally to $25K

Bitcoin price continues to press higher this week as demand for stablecoins and a key BTC price metric suggests bulls have a “healthy appetite.”

Bitcoin (BTC) rallied 11% between Jan. 20 and Jan. 21, reaching the $23,000 level and shattering bears’ expectations for a pullback to $20,000. Even more notable is the move brought demand from Asia-based retail investors, according to data from a key stablecoin premium indicator.

Traders should note that the tech-heavy Nasdaq 100 index also gained 5.1% between Jan. 20 and Jan. 23, fueled by investors’ hope in China reopening for business after its COVID-19 lockdowns and weaker-than-expected economic data in the U.S. and the Eurozone.

Another bit of bullish information came on Jan. 20 after U.S. Federal Reserve Governor Christopher Waller reinforced the market expectation of a 25 basis point interest rate increase in February. A handful of heavyweight companies are expected to report their latest quarterly earnings this week to complete the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.

In essence, the central bank is aiming for a “soft landing,“ or a controlled decline of the economy, with fewer job openings and less inflation. However, if companies struggle with their balance sheets due to the increased cost of capital, earnings tend to nosedive and ultimately layoffs will be much higher than anticipated.

On Jan. 23, on-chain analytics firm Glassnode pointed out that long-term Bitcoin investors held losing positions for over a year, so those are likely more resilient to future adverse price movements.

Let’s look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

The Asia-based stablecoin premium nears the FOMO area

The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 103%, and during bearish markets, the stablecoin’s market offer is flooded, causing a 4% or higher discount.

Currently, the USDC premium stands at 103.5%, up from 98.7% on Jan. 19, signaling higher demand for stablecoin buying from Asian investors. The movement coincided with Bitcoin’s 11% daily gain on Jan. 20 and indicates moderate FOMO by retail traders as BTC price approached $23,000.

Pro traders are not particularly excited after the recent gain

The long-to-short metric excludes externalities that might have solely impacted the stablecoin market. It also gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts, thus offering better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

*Exchanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass*

The first trend one can spot is Huobi and Binance’s top traders being extremely skeptical of the recent rally. Those whales and market makers did not change their long-to-short levels over the last week, meaning they are not confident about buying above $20,500, but they are unwilling to open short (bear) positions.

Interestingly, top traders at OKX reduced their net longs (bull) until Jan. 20 but drastically changed their positions during the latest phase of the bull run. Looking at a longer, three-week time frame, their current 1.05 long-to-short ratio remains lower than the 1.18 seen on Jan. 7.

Bears are shy, providing an excellent opportunity for bull runs

The 3.5% stablecoin premium in Asia indicates a higher appetite from retail traders. Additionally, the top traders’ long-to-short indicator shows no demand increase from shorts even as Bitcoin reached its highest level since August.

Furthermore, the $335 million liquidation in short (bear) BTC futures contracts between Jan. 19 and Jan. 20 signals that sellers continue to use excessive leverage, setting up the perfect storm for another leg of the bull run.

Unfortunately, Bitcoin price continues to be heavily dependent on the performance of stock markets. Considering how resilient BTC has been during the uncertainties regarding the bankruptcy of Digital Currency Group’s Genesis Capital, the odds favor a rally toward $24,000 or $25,000.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.