For one, the bitcoin bulls have reasons to celebrate after its price has recovered 34% from a low of $15,500 on November 21, but bears still have the upper hand on a larger time frame given BTC is down 52% in 12 months.
This week, traditional finance investors will be closely watching US retail sales data due on January 18, as well as fourth-quarter earnings reports from Goldman Sachs (GS), Morgan Stanley (MS), Netflix (NFLS), and Procter & Gamble (PG).
In the cryptocurrency markets, there is a slight relief stemming from some unexpected places – or people. Crypto entrepreneur Justin Sun is reportedly interested in acquiring assets from Distressed Digital Currency Group (DCG), the parent company of crypto lender Genesis and Grayscale fund manager.
On January 16, Binance exchange launched an OTC settlement solution for institutional investors. Custody services for regulated digital assets provide additional security, allowing investors to access the exchange system without having to deposit directly on the platform.
Another positive news came from Bitcoin’s mining difficulty which rose by 10.26% on January 15, reflecting increased competition for block support – a typically bullish sign for the industry. This increases the security of the network, but more importantly, it shows that miners can find strategic energy sources and are committed to the long-term investment required to mine bitcoin.
Let’s take a look at the Bitcoin derivatives metrics to better understand how professional traders fare in the current market conditions.
The stablecoin premium in Asia drops to a 6-month low
The premium is a good measure of cryptocurrency retailer demand in China. It measures the difference between peer-to-peer trades based in China and the United States dollar.
Excessive buying tends to pressure the index above the fair value at 100%, and during bear markets it overwhelms the supply of the stablecoin market, causing a discount of 4% or higher.
USDC is peer-to-peer against USD/CNY. Source: OKX
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Currently, the USD premium stands at 97.5%, down from 100% two weeks ago, indicating lower demand for stablecoin buying from Asian investors. The data gained importance after the 24% surge between January 7th and January 14th, as one would expect a huge pickup in demand from retailers.
However, this data is not necessarily bearish as traders may dump stablecoins due to the increased regulatory risks.
Premium futures finally showed a neutral sentiment
Quarterly futures contracts are usually avoided by retail traders due to their price difference from the spot markets. But professional traders prefer these tools because they prevent fluctuating funding rates in perpetual futures contracts.
The 2-month futures APR should trade between +4% to +8% in healthy markets to cover the associated costs and risks. Thus, when futures contracts trade below this range, it shows a lack of confidence from leveraged buyers – usually a bearish sign.
Bitcoin futures annual premium for two months. Source: Laevitas.ch
The chart above shows positive momentum for the premium of bitcoin futures, which now caps the neutral premium at 4% — the highest in five months. This indicator represents a dramatic change from the reversal, bearish sentiment that prevailed from the FTX crash in November through the early days of 2023.
Bitcoin support at $20,000 needs to be retested
While the seemingly easy rally to $20,000 looks encouraging, it has not been tested as support recently. At the same time, the lack of a stable currency premium in Asia shows the lack of demand from retail buyers. However, the current discount of 2.5% does not reflect unease or distress from sellers.
Related: Bitcoin on-chain and technical data are starting to suggest that a BTC price bottom is in place
This data supports the theory that Bitcoin needs to test the $20,000 support level to prove to investors that regardless of stock market behavior, the bearish sentiment caused by the contagion risks of FTX and Digital Currency Group is behind us.
There is still a chance that the macro data will favor a continuation of the bullish trend, so either way it could maintain the positive momentum.