Bitcoin price races toward $27K, but a swift recovery is not confirmed by market data

Bitcoin may have shown resilience by bouncing back swiftly from the $25,500 support level on June 6, however, surpassing $27,500 will not be a simple feat.

Investors are expecting even greater regulatory oversight following the bankruptcy of FTX in November 2022, including the recent legal actions taken against Coinbase and Binance.

Over the past six months, the United States Securities and Exchange Commission (SEC) has taken eight enforcement actions related to cryptocurrencies. Some analysts have speculated that the SEC is attempting to make up for not adequately monitoring FTX by taking action against the two largest exchanges.

Investors also have a wider view, worrying that a worldwide recession is on the horizon, thus restraining the potential gains of risk-on investments such as stocks, cryptocurrencies, and emerging markets.

The Eurostat, the region’s statistical office, released revised estimates on June 8th which showed that the eurozone had entered a recession in the first quarter of this year. This poor economic performance could restrict the European Central Bank’s capacity to raise interest rates further in order to address inflation.

Billionaire Ray Dalio, the founder of Bridgewater Associates, expressed his concern that the U.S. is experiencing persistent inflation combined with raised real interest rates. Dalio cautioned of an abundance of debt and a scarcity of purchasers, which is particularly worrisome since the U.S. government is eager to obtain funds after the debt limit was reached.

Recent macroeconomic data has been mostly unfavorable, particularly after China declared a 4.5% decrease in imports year-on-year on June 6. Additionally, Japan reported a 0.3% quarter-to-quarter decrease in gross domestic product on June 7.

Let us analyze the metrics of Bitcoin (BTC) derivatives to gain a better insight into how professional traders are positioned in the context of the current weaker global circumstances.

Bitcoin margin and futures favor bullish momentum

Margin markets give investors an understanding of how professional traders are positioned, as they enable them to borrow cryptocurrency for the purpose of increasing their exposure.

OKX, for example, offers a margin lending indicator based on the stablecoin/Bitcoin ratio. Traders can increase their leverage by borrowing stablecoins to purchase Bitcoin. Conversely, Bitcoin borrowers are only able to wager on the decrease of a cryptocurrency’s value.

The graph above reveals that the margin-lending ratio for OKX traders skyrocketed on June 5th following Bitcoin’s 7% drop to $25,500. This likely caught them off guard, as the indicator hit an extraordinary 62 in favor of longs, which is highly uncommon and not viable in the long run.

On June 6, the OKX margin-lending ratio was adjusted to 34 as leveraged longs had to decrease their involvement and more margin was probably put in.

Investors should also evaluate the Bitcoin futures long-to-short ratio, as it eliminates outside factors that could have only affected the margin markets.

Occasionally, there are differences in methodology between exchanges, so it is important for readers to keep track of changes rather than relying solely on the figures given.

On June 7 and 8, both OKX and Binance’s most successful traders decreased their long-to-short ratios, indicating a lack of trust. More specifically, the ratio for the top traders on OKX decreased from 1.08 to 0.78 on June 8, while the ratio for Binance dropped from 1.35 to 1.29 on the same day.

The Bitcoin price recovery has failed to materialize, as the SEC has taken action against exchanges, increasing the possibility of a BTC price collapse.

Overall, Bitcoin bulls appear to be in a difficult position, due to both the growing regulatory pressure on cryptocurrency and the ongoing global economic crisis.

Derivatives markets related to Bitcoin suggest that there is a low likelihood of the BTC value surpassing $27,500 in the near to medium future. To put it another way, the market structure of Bitcoin is bearish, so a retest of the $25,500 support level is the most probable result.

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