February 2, 2023

Bitcoin (BTC) failed to break above the USD 17,250 resistance on Dec 11 and subsequently faced a 2.2% correction. More importantly, the last daily close above this level was more than 30 days ago – reinforcing high volume sellers’ contention near the $330 billion market cap mark.

Strangely enough, this valuation level is slightly behind Palladium, the world’s 23rd most valuable traded asset with a capitalization of $342 billion. So on the one hand Bitcoin bulls have some reasons to celebrate as the price recovered 10% from the low of $15,500 on Nov 21, but bears still have the upper hand on a larger time frame as BTC is down 64% since the beginning of the year. .

Two events are expected to determine the fate of traditional financial investors as the US consumer price index is expected on December 1. On December 13, US Federal Reserve Chairman Jerome Powell will announce the size of the next rate hike on December 14. Investors will also eagerly await Powell’s press conference.

There has been slight relief in the cryptocurrency markets due to evidence of reserves from the exchanges, although several analysts have criticized the limited details of each report.

Derivatives exchange Bybit was the latest addition to the transparency initiative, allowing users to self-verify their deposits using Merkle Trees, according to a Dec. 12 announcement.

However, regulatory risks remain high after US Democrat senator and crypto skeptic Jon Tester boldly stated that he “sees no reason why” crypto should exist. During a Dec. 11 appearance on NBC, Tester argued that crypto has no real value, so regulation of the industry would give it legitimacy.

Finally, according to Reuters, the US Department of Justice (DOJ) is nearing completion of its investigation into Binanceexchange, which started in 2018. The December 12 report suggests conflict among prosecutors over whether the evidence is sufficient to bring criminal charges.

Let’s take a look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin premium drops to 2-month low

The USD Coin (USDC) premium is a good gauge of demand from China-based crypto retailers. It measures the difference between China-based peer-to-peer transactions and the US dollar.

Excessive buying demand tends to push the indicator above 100% fair value, and during bearish markets, the stablecoin’s market supply is flooded, causing a discount of 4% or more.

USDC peer to peer vs USD/CNY. Source: OKX

Currently, the USDC premium is at 99%, down from 102.5% on December 3, indicating less demand for buying stablecoins from Asian investors. The data is gaining relevance after the multiple failed attempts to break above the $17,250 resistance.

This data is not necessarily bearish, however, as the stablecoin position could have been converted for fiat (paid out) solely due to counterparty risk – meaning investors pulled out of exchanges.

Leveraged buyers ignored the failed resistance break

The long-to-short metric excludes externalities that may have only impacted the stablecoin market. It also collects data from exchange clients’ positions on the spot, perpetual and quarterly forward contracts, providing better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should track changes rather than absolute numbers.

Stock exchange’s top traders Bitcoin long-to-short ratio. Source: Coinglass

While Bitcoin failed to break the $17,250 resistance, professional traders have held their leveraged long positions unchanged according to the long-to-short indicator.

For example, the ratio for Binance traders fell slightly from 1.08 on December 5 to its current level of 1.05. Meanwhile, Huobi showed a modest decline in its long-to-short ratio, with the indicator moving from 1.04 to 1.02 in the seven days to Dec. 12.

But on the OKX exchange, the stat rose from 1.04 on Dec. 5 to its current ratio of 1.07. So, on average, traders maintained their leverage ratio throughout the week, which is encouraging numbers given the lackluster price action.

Bitcoin’s $17,250 resistance is losing momentum

There’s an old saying, “if a support or resistance keeps getting tested, it’s likely to get weaker.” Currently, the stablecoin premium and long-to-short from top traders suggest that leveraged buyers are not supportive, despite the many failures to break above $17,250 in December.

Related: NYC Mayor Holds On to Bitcoin Promise Amid Bear Market, FTX – Report

While the Asian stablecoin bounty is no longer present, the 1% discount is not enough to signal discomfort or distressed sellers. In addition, the long-to-short ratio of the top traders remained flat from the previous week.

The data from those two markets supports Bitcoin moving above $17,250 as long as the December 14 meeting of the US Fed indicates that rate hikes are about to end. If this were the case, investors’ bearish sentiment could be extinguished as bears will gain less confidence, especially if Bitcoin price holds the $17,000 level.