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 Bank of England’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.