Bitcoin bulls ignore the recent regulatory FUD by aiming to turn $25K into support
It may seem like an eternity and a day ago when the Bitcoin (BTC) price traded below $18,000, but in reality it was 40 days ago. Generally, cryptocurrency traders tend to have a short-term memory, and more importantly, they attach less importance to negative news during bull runs. A good example of this behavior is BTC’s 15% gain since February 13, despite a steady stream of bad news in the crypto market.
For example, on February 13, the New York State Department of Financial Services (NYDFS) ordered Paxos to “stop minting” the Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. Similarly, Reuters reported on February 16 that a bank account controlled by Binance.US moved over $400 million to trading firm Merit Peak — which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao.
The wave of regulatory pressure continued on February 17 when the United States Securities and Exchange Commission (SEC) announced a $1.4 million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” regarding EthereumMax tokens on Social Media.
None of these adverse events managed to break investors’ optimism after weak economic data signaled that the US Federal Reserve (FED) has less room to continue raising interest rates. The Philadelphia FED Manufacturing Survey showed a 24% decline on February 16, and US housing starts rose 1.31 million from the previous month, which is softer than expectations of 1.36 million.
Let’s take a look at Bitcoin derivatives calculations to better understand how professional traders are positioned in the current market conditions.
Asia-based stablecoin demand remains ‘modest’
Traders should refer to the USD Coin (USDC) premium to gauge cryptocurrency demand in Asia. The index measures the difference between China-based peer-to-peer stablecoin trades and the US dollar.
Excessive demand for the purchase of cryptocurrency can push the indicator above the fair value of 104%. On the other hand, stablecoins’ market supply is flooded during bearish markets, causing a 4% or higher discount.
Currently, the USDC premium stands at 2.7%, which is flat from last week on February 13 and indicates modest demand for stablecoin purchases in Asia. However, the positive indicator shows that retail traders were not spooked by the latest news flow or Bitcoin’s rejection of $25,000.
Futures premium shows bullish momentum
Retail traders usually avoid quarterly futures because of their price difference from the spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuations in funding rates in a perpetual futures contract.
The annual premium for two-month futures should trade between +4% and +8% in healthy markets to cover costs and associated risk. Therefore, when futures trade below this range, it shows a lack of confidence from leverage buyers. This is usually a bearish indicator.
The chart shows bullish momentum as the Bitcoin futures premium broke above the 4% neutral threshold on February 16. This move represents a return to a neutral-to-bullish sentiment that prevailed until early February. As a result, it is clear that professional traders are becoming more comfortable with Bitcoin price trading above $24,000.
Related: Hong Kong Outlines Upcoming Crypto Licensing Regime
The limited effect of regulatory measures is a positive sign
While Bitcoin’s 15% price increase since February 13 is encouraging, the regulatory news flow has been primarily negative. Investors are excited about the US FED’s reduced ability to dampen the economy and contain inflation. Therefore, one can understand how these bearish events could not break the spirit of cryptocurrency traders.
Ultimately, the correlation with the S&P 500 50-day futures remains high, at 83%. Correlation statistics above 70% indicate that asset classes move in sync, which means that the macroeconomic scenario is likely to have determined the overall trend.
Currently, both retail and pro traders are showing signs of confidence according to the stablecoin premium and BTC futures. Accordingly, the odds favor a continuation of the rally because the absence of a price correction typically marks bull markets despite the presence of bearish events, especially regulatory ones.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
