Following a brief revisit of the $25,000 support on June 15, Bitcoin increased 6.5% as buyers were able to safeguard the $26,300 mark. Despite this, the overall attitude is still slightly bearish as the digital currency has dropped 12.7% in two months.
The decision of Judge Amy Berman Jackson of the U.S. district court to lift the temporary restraining order on Binance.US has been seen as a sign of the improving sentiment of investors. On June 16, the exchange reportedly reached a settlement with the Securities and Exchange Commission (SEC), avoiding the potential freezing of its assets.
Over a longer period of time, the global regulatory environment has had a detrimental effect on cryptocurrency prices. In addition to the US Securities and Exchange Commission (SEC) attempting to identify which altcoins it deems to be securities and taking legal action against the two biggest exchanges worldwide, the European Union made the Markets in Crypto-Assets (MiCA) regulations official on May 31. This implies that crypto enterprises have to comply with MiCA’s regulations within a specified time frame.
Curious to note, even as Bitcoin (BTC) has not been doing well, the S&P 500 index reached its peak in 14 months on June 16. Despite this rebound, strategists from JPMorgan predict that the rally will be challenged in the latter half of 2023 “if growth does not continue in absolute terms.”
Investors will remain attentive to the Federal Reserve, as Chair Jay Powell is scheduled to give his semi-annual testimony to the House Financial Services Committee on June 21 and the Senate Banking Committee on the morning of June 22.
Let us analyze Bitcoin derivatives data to gain a better comprehension of how professional traders are situated in light of deteriorating macroeconomic conditions.
Bitcoin margin and futures show mild demand for leverage longs
Margin markets offer insight into the positioning of professional traders, as they enable investors to acquire cryptocurrency through borrowing to increase their positions.
OKX, for example, has a margin-lending indicator based on the stablecoin/Bitcoin ratio. By borrowing stablecoins, traders can increase their exposure to Bitcoin. Conversely, those who take out loans in Bitcoin can only wager on the devaluation of a cryptocurrency.
The chart above reveals that the margin-lending ratio of OKX traders has been decreasing since June 10, suggesting that the power of longs has diminished. The current 23:1 ratio, which is in favor of stablecoin lending, still favors bulls but is close to its lowest point in five weeks.
Investors should also assess the Bitcoin futures long-to-short ratio, as it eliminates external factors that could have only impacted the margin markets.
Occasionally, there may be discrepancies in methodology between exchanges, so it is recommended that readers keep track of changes rather than relying on exact figures.
Top traders at OKX significantly decreased their short positions on June 15 as Bitcoin’s price dropped to its lowest point in three months at $24,800. Nevertheless, those traders were not content with a ratio that favored longs, and it has since reverted to the two-week average of 0.80.
At Binance, the opposite occurred; the top traders decreased their long-to-short ratio to 1.18 on June 15, but then increased their longs, bringing the ratio to 1.25. This is an improvement, but the long-to-short ratio of Binance’s top traders is currently in line with the average from the past two weeks.
The stocks market has seen a rally following the hawkish stance of the Federal Reserve, while cryptocurrencies have lagged behind.
Bitcoin’s price gains are capped despite resilience in derivative metrics
Overall, Bitcoin bulls are not confident enough to take advantage of long positions through the use of margin and futures markets. Since the Federal Reserve chose to halt interest rate increases, thus improving the outlook for corporate earnings, investors’ focus has shifted away from BTC, resulting in a lack of momentum.
Despite the intense regulatory pressure, professional traders have not adopted a bearish outlook, as indicated by Bitcoin derivatives metrics. Nevertheless, bears are in control as the 20-day resistance at $27,500 continues to hold, limiting the upside potential in the short-term to a mere 3.8%.
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