US markets reach year-to-date highs, the Fed pauses rate hikes, Binance.US and the SEC settle, but various data shows that a part of the Bitcoin market remains a little nervous.
After momentarily touching $25,000 support again on June 15, Bitcoin (BTC) gained 6.5%, as the bulls successfully defended the $26,300 level. Despite this, the general sentiment remains slightly bearish, as the cryptocurrency has fallen 12.7% in two months.
The dismissal of the Binance.US temporary freeze order by US District Court Judge Amy Berman Jackson has something to do with improving investor sentiment. On June 16, the exchange would have reached an agreement with the United States Securities and Exchange Commission (SEC), avoiding the freezing of all its assets.
In the longer term, the global regulatory environment has been extremely detrimental to cryptocurrency prices. In addition to the SEC trying to unilaterally label exactly which altcoins it considers to be securities and taking two major global exchanges to court, the European Union on May 31 enacted the Markets in Crypto-Assets (MiCA) regulations . This means that cryptocurrency companies have set deadlines to apply and comply with the new regulatory requirements.
Interestingly, while Bitcoin’s performance has been lackluster, on June 16, the S&P 500 Index hit its highest level in 14 months. Even with this recovery, JPMorgan strategists are waiting that the rebound will come under pressure in the second half of 2023 “if growth stagnates in absolute terms.”
Investors will keep their eyes on the US central bank as Fed Chairman Jerome Powell testifies before the House Financial Services Committee on June 21 and the Senate Banking Committee on June 22 about the tomorrow, as part of his semiannual testimony before lawmakers.
Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioning amid a weaker macroeconomic outlook.
Margin Market and Bitcoin Futures Show Mild Demand for Leveraged Longs
The markets of margins allow to know the position of professional traders, since they allow investors to borrow cryptocurrency to leverage their positions.
OKX, for example, offers a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the price of the cryptocurrency falling.
The above chart shows that OKX traders’ margin lending ratio has been declining since June 10, indicating that the overwhelming dominance of longs is behind us. The current 23x ratio favoring stablecoin lending continues to favor bulls, but stands near 5-week lows.
Investors should also look at the long-short metric for Bitcoin futures, as it excludes externalities that might have affected margin markets only.
From time to time there are methodological discrepancies between exchanges, so readers should look at the changes and not the absolute numbers.
OKX professional traders cut their short positions considerably on June 15, when the price of Bitcoin fell to its lowest level in 3 months, $24,800. However, these traders were not comfortable holding a ratio that favored the longs, and it has since returned to a 0.80 ratio, in line with the 2-week average.
The opposite move occurred on Binance, as professional traders reduced their ratio of long to short positions to 1.18 on June 15, but later added more long positions, as the indicator sits at 1.25. Despite the improvement, the ratio of longs to shorts of the top traders on Binance is currently in line with the previous 2-week average.
Bitcoin Price Holds Back Despite Derivatives Resistance
In general, Bitcoin bulls lack the confidence to leverage long positions using the spread and futures markets. BTC lacks momentum as investor attention has shifted to the stock market after the Fed decided to pause its interest rate hikes, improving the outlook for corporate profits.
Despite extremely negative regulatory pressure, professional traders did not turn bearish on Bitcoin derivatives metrics. However, the bears have the upper hand as the 20-day resistance at $27,500 strengthens, limiting short-term upside to just 3.8%.
This article is for general informational purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. All investing and trading involves risk, so readers should do their own research before making a decision.