Bitcoin bulls are ignoring recent regulatory FUD, aiming to flip $25,000 for support
Bitcoin bulls are ignoring recent regulatory FUD, aiming to flip $25,000 for support
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It seems like forever since Bitcoin (BTC) traded below $18,000 when in reality it has been 40 days. Cryptocurrency traders tend to have short-term memories, and more importantly, they give less importance to negative news during bull runs. A great example of this behavior is BTC’s 15% surge since Feb. 13 despite a steady flow of bad news in the crypto market.
For example, on Feb. 13, the New York State Department of Financial Services ordered Paxos to “retire” Paxos-issued dollar-pegged stablecoin Binance USD (BUSD). Similarly, on Feb. 16, Reuters reported that a bank account controlled by Binance.US transferred over $400 million to trading firm Merit Peak — which is said to be an independent entity also controlled by Binance CEO Changpeng Zhao.
The regulatory pressure wave continued on Feb. 17 when the United States Securities and Exchange Commission filed a $1.4 million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” about EthereumMax (EMAX) token announced on social media.
None of these negative events could dampen investors’ optimism after weak economic data signaled that the US Federal Reserve has less room for further rate hikes. The Philadelphia Fed’s manufacturing index fell 24% on Feb. 16 and US housing starts rose 1.31 million from the previous month, weaker 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.
Stablecoin Demand From Asia Remains “Modest”
Traders should refer to the USD Coin (USDC) premium to gauge cryptocurrency demand in Asia. The index measures the difference between peer-to-peer stablecoin trades in China and the US dollar.
Excessive buying demand for cryptocurrencies can push the indicator 104% above fair value. On the other hand, the stablecoins market supply is flooded during declining markets, resulting in a discount of 4% or more.
USDC peer to peer vs USD/CNY. Source: OKX
Currently, the USDC premium is 2.7%, flat from the previous week on Feb. 13, indicating modest demand for stablecoin buying in Asia. However, the positive indicator shows that retailers were not afraid of the recent news or Bitcoin’s rejection at $25,000.
Futures premium shows bullish momentum
Retailers typically avoid quarterly futures due to their price differential to spot markets. Meanwhile, professional traders prefer these instruments because they prevent fluctuations in funding rates in a perpetual futures contract.
The annualized two-month futures premium should trade between +4% and +8% in healthy markets to cover the costs and associated risks. So when the futures are trading below this range, it shows a lack of confidence from leverage buyers. This is usually a bearish indicator.
Bitcoin 2 Month Futures Annualized Premium. Source: Laevitas
The chart shows bullish momentum as the bitcoin futures premium crossed the 4% neutral threshold on Feb. 16. This move represents a return to the neutral to bullish sentiment that prevailed until early February. As a result, it is clear that professional traders are more comfortable trading Bitcoin above $24,000.
Related: Hong Kong Outlines Upcoming Crypto Licensing Scheme
The limited impact of regulatory action is a positive sign
While Bitcoin’s 15% price gain since Feb. 13 is encouraging, the regulatory news has been mostly negative. Investors are excited about the Federal Reserve’s reduced ability to contain the economy and curb inflation. Hence, one can understand that these bearish events could not break the spirit of cryptocurrency traders.
Ultimately, the correlation with the S&P 500 50-day futures remains high at 83%. Correlation statistics above 70% indicate that asset classes are moving in parallel, meaning that the macroeconomic scenario is likely to drive the overall trend.
Right now, both retail and professional traders are showing signs of confidence, as evidenced by the stablecoin premium and BTC futures metrics. Consequently, the odds favor a continuation of the rally as the absence of a price correction typically marks bull markets despite the presence of bearish events, particularly regulatory ones.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
