As of 40 days ago, Bitcoin seemed to be trading forever below $18,000. However, traders generally have short-term memory and, more importantly, they pay less attention to negative news during bull markets. A good example of this behavior is the 15% rise in BTC since February 13th, despite the constant bad news in the crypto market.
For example, on Feb. 13, the New York State Department of Financial Services ordered Paxos to “stop minting” BUSD, Paxos’ USD-pegged stablecoin. Similarly, Reuters reported on Feb. 16 that more than $400 million was transferred from a bank account controlled by Binance.US to merchant firm Merit Peak — believed to be an independent entity also run by CEO Binance Changpeng Zhao. control.
On Feb. 17, the U.S. Securities and Exchange Commission announced a $1.4 million settlement of former NBA player Paul Pierce’s ad charges, reaching a wave of regulatory pressure over “false and misleading representations” of the EthereumMax (EMAX) token on the social network.
What’s more, there were no adverse events to dampen investor optimism after weak economic data suggested the Federal Reserve (Fed) has less room to continue raising interest rates. The Philadelphia Fed manufacturing index fell 24% on February 16, and the US real estate market increased by 1.31 million month-on-month, lower than the expected 1.36 million.
Let’s take a look at the Bitcoin derivatives indicators to get a better idea of where professional traders stand under current market conditions.
Asian demand for stablecoins remains ‘modest’
Traders should refer to the USDC spread to gauge cryptocurrency demand in Asia. The index measures the difference between Chinese peer-to-peer stablecoin transactions and the U.S. dollar.
Excessive cryptocurrency buying demand could push the metric above 104% of fair value. Stablecoins, on the other hand, flood the market during bear markets, causing discounts of 4% or more.
USDC pip to USD/CNY | Source: OKX
Currently, the USDC spread stands at 2.7%, unchanged from the week before Feb. 13, indicating tepid demand for stablecoins in Asia. However, a positive indicator means that retail traders will not be deterred by the recent news flow or rejection of Bitcoin at $25,000.
Futures spreads show bullish momentum
Quarterly futures are often avoided by retail traders due to price differences from the spot market. At the same time, professional traders prefer this tool because they are forever protected from fluctuations in the futures contract funding rate.
The annual spread for two-month futures should trade between +4% and +8% in a sound market to cover the costs and risks involved. Therefore, when futures contracts trade below that range, it signals a lack of confidence among leveraged buyers. This is usually a bearish indicator.
2-month bitcoin futures annual spread | Source: Laevitas
The chart shows bullish momentum, as the Bitcoin futures contango crossed the 4% neutral threshold on Feb. 2. The move represents a neutral-to-bullish sentiment that is back after being popular until early February. So, it’s clear that professional traders are becoming more comfortable with Bitcoin trading above $24,000. .
Legal action with limited impact is a positive sign
While Bitcoin’s 15% price increase since February 13 was encouraging, the regulatory news was mostly negative. Investors are excited about the Fed’s diminished ability to control the economy and inflation. So it’s understandable that those discounts haven’t quelled their high spirits.
Finally, the correlation with the S&P 500 50-day futures contract remains high at 83%. A relevant statistic above 70% means that the asset classes are moving in tandem, which means that the macroeconomic scenario may determine the overall trend.
Currently, both retail and professional traders are showing signs of confidence, according to premium data for stablecoins and BTC futures. So despite bearish events, especially regulatory-related ones, the absence of the corrective moves that usually mark a bull market has the potential to continue higher.
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As reported by Cointelegraph