Bitcoin (BTC) failed to break above the $17,250 resistance on Dec. 11 and subsequently faced a 2.2% correction. More importantly, the last daily close above this level was over 30 days ago — reinforcing the thesis of size sellers near the $330 billion market capitalization mark.
Curiously, this valuation level is slightly behind Palladium, the world’s 23rd most valuable traded asset with a $342 billion capitalization. So from one side, Bitcoin bulls have some reasons to celebrate because the price recovered 10% from the $15,500 low on Nov. 21, but bears still have the upper hand on a larger time frame since BTC is down 64% year-to-date.
Two events are expected to determine traditional finance investors’ fate, as the United States consumer price index is expected onDec. 13 and U.S. Federal Reserve chair Jerome Powell will announce the size of the next interest rate hike on Dec. 14. Powell’s press conference will also be anxiously awaited by investors.
In the cryptocurrency markets, there is mild relief stemming from exchanges’ proof of reserves, 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 U.S. 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 regulating the sector would give it legitimacy.
Lastly, according to Reuters, the U.S. Department of Justice (DOJ) is nearing the completion of its investigation into Binanceexchange, which started in 2018. The Dec. 12 report suggests a conflict among prosecutors on whether the evidence is enough to pursue criminal charges.
Let’s look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.
The Asia-based stablecoin premium drops to 2-month low
The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.
Excessive buying demand tends to pressure the indicator above fair value at 100% and during bearish markets the stablecoin’s market offer is flooded, causing a 4% or higher discount.
Currently, the USDC premium stands at 99%, down from 102.5% on Dec. 3, indicating lesser demand for stablecoin buying from Asian investors. The data gains relevance after the multiple failed attempts to break above the $17,250 resistance.
However, this data should not necessarily be bearish because the stablecoin position could have been converted for fiat (cashed out) solely due to counterparty risks — meaning investors withdrew from exchanges.
Leverage buyers ignored the failed resistance break
The long-to-short metric excludes externalities that might have solely impacted the stablecoin market. It also gathers data from exchange clients’ positions on the spot, perpetual, and quarterly futures contracts, thus offering better information on how professional traders are positioned.
There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.
Even though Bitcoin failed to break the $17,250 resistance, professional traders have kept their leverage long positions unchanged according to the long-to-short indicator.
For instance, the ratio for Binance traders slightly declined from 1.08 on Dec. 5 to the current 1.05 level. Meanwhile, Huobi displayed a modest decrease in its long-to-short ratio, with the indicator moving from 1.04 to 1.02 in the seven days until Dec. 12.
Yet, at OKX exchange, the metric increased from 1.04 on Dec. 5 to the current 1.07 ratio. So, on average, traders have kept their leverage ratio during the week which is encouraging data considering the lackluster price action.
Bitcoin’s $17,250 resistance is losing strength
There’s an old saying: “if a support or resistance keeps getting tested, it is likely to become weaker.” Currently, the stablecoin premium and top traders’ long-to-short — suggest that leverage buyers are not backing despite the multiple failures to break above $17,250 in December.
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Even though the Asian stablecoin premium is no longer present, the 1% discount is not enough to signal discomfort or distressed sellers. Furthermore, the top traders’ long-to-short ratio stood flat versus the previous week.
The data from those two markets supports the thesis of Bitcoin breaking above $17,250 as long as the U.S. FED meeting on Dec. 14 signals that the interest rate hikes are nearing an end. If this were the case, investors’ bearish sentiment could be extinguished because bears will become less confident, especially if Bitcoin price holds the $17,000 level.
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