Bitcoin (BTC) price chart for the past two months only reflects a bearish outlook and it is no secret that the cryptocurrency has made persistently lower lows since breaking through $48,000 in late March.
Bitcoin price in US dollars. Source: TradingView
Curiously, the divergence in support levels is widening as the correction continues to drain investor confidence and risk appetite. For example, the last baseline of $19,000 is nearly $10,000 away from the previous support. So if the same move were to occur, the next logical price level would be $8000.
Traders are afraid of regulations and infection
On July 11, the Financial Stability Board (FSB), a global financial regulator that includes all G-20 countries, announced that a framework of recommendations for the crypto sector is expected in October. The FSB added that international regulators need to oversee the cryptocurrency markets in line with the principle of “same activity, same risk, same regulation.”
In a letter written on July 12, John Cunliffe, the BoE’s Deputy Governor for Financial Stability said that cryptocurrency is somehow gone and should not be a concern anymore. “Innovation must occur in a framework where risk is managed,” Cunliffe added.
So far, investors have not discovered the total losses from deposits with crypto lenders Celsius and Voyager Digital, and the two companies continue to pursue either a recovery or bankruptcy plan. According to Voyager, the company still has “claims against Three Arrows Capital” worth $650 million, so the exact numbers of client assets remain unknown.
The negative news flow is reflected in the premium for Bitcoin futures contracts on the Chicago Mercantile Exchange. This data measures the difference between long-term futures contracts and current spot prices in the normal markets.
When this indicator fades or turns negative, this is an alarming red flag. This situation is also known as lagging and indicates a downtrend.
One-month forward contract premium for BTC CME vs. Coinbase/USD. Source: TradingView
These fixed month contracts usually trade at a slight premium, which indicates that sellers are asking for more money to withhold settlement for a longer period. As a result, futures contracts should trade at a premium of 0.25% – 0.75% in healthy markets, a situation known as “contango.”
Notice how the index has been sitting below the “neutral” range since early April, as Bitcoin failed to sustain levels above $45,000. The data shows that institutional traders are not ready to open long positions with leverage, although it is not yet a bearish structure.
Macroeconomic concerns prevent investors from trading cryptocurrencies
The data provided by the exchange highlights the positions of the long to short term traders. By analyzing the position of each client on the spot, perpetual and future contracts, one can better understand whether professional traders tend to be bullish or bearish.
There are occasional differences in methodologies between the different exchanges, so viewers should monitor changes rather than absolute numbers.
Top Bitcoin Traders Long to Short Ratio Exchanges. Source: Coinglass
Despite Bitcoin’s 11% correction from July 9-12, top traders have increased their long leverage. Binance’s buy-to-sell ratio remained relatively flat at 1.13, while Huobi’s top traders started at 0.95 and ended the period at 0.93. However, this effect was offset by OKX traders who raised their bullish bets from 1.09 to 1.32.
Related: The Search Term ‘Bitcoin Crash’ Is Popular – Here’s Why
The lack of a premium in CME futures is not a cause for concern as Bitcoin is struggling with the $20,000 resistance. Moreover, major traders on derivatives exchanges increased their long positions despite the 11% price drop in three days.
Regulatory pressure is unlikely to abate in the short term, and at the same time, there is little the Fed can do to suppress inflation without causing some form of economic crisis. For this reason, professional traders are not in a rush to buy the dip as the correlation of bitcoin to traditional assets remains high.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your research when making a decision.
