Bitcoin Surges Amid Regulatory Uncertainty; Lacks Bullish Derivates Confidence
Summary:
Bitcoin saw an 8.4% increase from May 15 to May 16, peaking at $66,750. However, this recovery has not sufficiently instilled bullishness, partly due to traditional assets' strong performance. With regulatory uncertainty, particularly in the US, Bitcoin investors remain hesitant. Furthermore, numerous ongoing lawsuits in the US against crypto firms and recent arrests related to money laundering using stablecoins in China have contributed to the uncertainty. Bitcoin's derivatives remained flat despite the price surge, and current metrics suggest traders lack confidence amid regulatory ambiguity.
In a space of 24 hours from May 15 to May 16, Bitcoin saw an increase of 8.4%, achieving a three-week high of $66,750. Despite stabilizing close to $65,000, this significance in price trajectory indicates a recovery from the earlier dip to $57,000 support on May 1. Nevertheless, this increase hasn't been enough to generate a bullish outlook as per Bitcoin derivatives metrics.
The underwhelming performance of Bitcoin can partly be related to the exceptional outcomes of conventional assets. The S&P 500 index made a record high on May 16, marking a total increase of 6% over a fortnight. Concurrently, the price of gold rose 4% during the same time frame, presently traded at $2,375, barely 1% below its highest ever closing price.
To match its record closing sum of $73,084, Bitcoin would have to witness an extra surge of 12%. However, this seems implausible considering the primary propellant of the price, the inflows from spot Bitcoin Exchange-Traded Funds (ETFs), have slowed down. ETFs, since their introduction in January, have procured $12.1 billion in investments but have been stagnant for the previous two months.
A deteriorating regulatory scenario, especially within the US, might elucidate why investors are unsure about buying Bitcoin using derivatives, even considering the recent price increase. The chair of U.S. Commodity Futures Trading Commission (CFTC), Rostin Behnam, cautioned on May 6 about impending enforcement actions against the crypto arena within the next half a year to two years.
Furthermore, U.S. regulators have several existing lawsuits against crypto businesses, such as Binance, Coinbase, and Kraken. Recent enforcement proceedings against services concentrated on privacy and broker-dealers like Robinhood have added to the ambiguity. A lack of clear regulatory guidelines and indistinct jurisdiction boundaries curtail the eagerness of Bitcoin investors.
Cryptocurrencies were also mired by negative press following the apprehension of 193 persons in China related to money laundering operations using stablecoins. On May 15, it was alleged that these individuals used stablecoins to transfer $1.9 billion for smuggling goods and investments abroad. Moreover, on May 1, a pair of U.S. Senators asked for an inquiry into cryptocurrencies' use for funding terrorist groups in the Middle East.
In spite of the rise above $66,000, Bitcoin derivatives remained unchanged. To understand the influence of the deteriorating regulatory setting on whale sentiment, the data from BTC futures markets was analyzed. The ratio of top traders' long-to-short consolidates positions across spot, perpetual, and quarterly futures contracts, providing a comprehensive insight into the optimism or pessimism of traders.
At OKX, the present long-to-short ratio is at 0.96, signifying nearly equivalent positions for bulls and bears. However, compared to the optimistic stance on May 14, with the indicator at 1.25 favoring longs, this is less hopeful. Similarly, the top traders at Binance are now less bullish than on May 14, with the long-to-short ratio falling from 1.31 to 1.14.
Perpetual futures, also known as inverse swaps, which incorporate an embedded rate that recalculates every eight hours, can be examined to understand the preference of retail traders. A negative rate denotes a preference for leverage being utilized by shorts (sellers).
Bitcoin’s funding rate has remained below 0.01% for the previous month, indicating a balanced demand between longs and shorts. As per derivatives metrics, not even the recent surge above $66,000 could inspire confidence in retail traders.
In essence, the continued regulatory ambiguity makes investors wary of placing optimistic bets. However, if Bitcoin breaks the $68,000 mark, most traders will be taken aback, potentially triggering the rally as there is space for bullish leverage.
This news piece should not be construed as investment advice or recommendations. Every investment and trading move comes with risk, and readers should perform their own research prior to making a decision.
Published At
5/17/2024 12:25:18 AM
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