Two Derivative Metrics Predict a $16k Bitcoin Retest
Top traders’ long-to-short ratio and stronger demand for stablecoins in Asia indicate higher odds of further price correction.
BTC $16,830 dropped below $16,800 on Dec. 16, its lowest level in two weeks. More crucially, the movement was a full reverse from the brief enthusiasm that had led to an i$18,370 peak on Dec. 14.
Bitcoin fell 3.8% in seven days, while the S&P 500 Index fell 3.5%. The correlation was important, but it also liquidated $206 million in BTC futures contracts on Dec. 15.
As vehicle loan defaults from low-income individuals reach 2019 levels, investors are uneasy. After the average new car payment rose 26% to $718 in three years, concerns arose.
The US, UK, EU, and Swiss central banks raised interest rates by 50 basis points to multiyear highs, signaling that borrowing costs will likely rise longer than the market expected.
Two major auditors abruptly left exchanges, reintroducing market uncertainty. Mazars Group, a French auditing business that worked with Binance, KuCoin, and Crypto.com, removed the crypto audit section from its website.
Armanino, an accounting company, likewise stopped crypto audits. OK, Gate.io, and the unstable FTX exchange were audited by the auditor. In 2014, Armanino was the first accounting firm to build crypto industry partnerships.
Derivatives measures will help us comprehend professional traders’ market positions.
Asia-Based Stablecoin Premium Hits 2-Month Low
US Dollar Coin or USDC falls by $1.00 on the stock market.
The premium is an accurate reflection of the interest among Chinese individual investors in cryptocurrencies. Differentiation between P2P transactions in China and USD is calculated.
There is a tendency for excessive purchasing demand to push the indicator over 100%, which is the fair value, and in bearish markets, the stablecoin’s market offer is swamped, resulting in a markdown of 4% or more.
The USDC premium has increased to 101.8% from 99% on December 12th, reflecting increased demand for stablecoin purchases from Asian investors. The information became more important following the drastic 9.7 percent drop in five days from the top of $18,370 on December 14.
The stablecoin may have been purchased to hedge against losses in the cryptocurrency market, thus this indication may not be as positive as it first appears.
Leverage Purchasers Gradually Gave Up
Long-to-short excludes stablecoin market-specific externalities. It also collects exchange clients’ spot, perpetual, and quarterly futures contract positions to better understand professional traders’ positions.
Readers should track changes rather than absolute data due to methodological differences across exchanges.
The long-to-short indicator showed experienced traders reducing their long bets when Bitcoin fell below $16,800.
Binance traders’ ratio dropped from 1.11 on Dec. 14 to 1.04 today. In the same period, Huobi’s long-to-short ratio dropped from 1.01 to 0.05.
Finally, the OKX exchange measure dropped from 1.00 on Dec. 14 to 0.98. Over the past five days, traders have reduced their leverage-long ratio, signaling less market confidence.
A Re-evaluation of the $16,000 Threshold is Expected to Occur
A combination of the fall in the long-to-short indicator and the modest 101.8% stablecoin premium in Asia reveals a narrative of purchasers giving in to pessimism.
Furthermore, the liquidation of long BTC futures contracts totaling $206 million indicates that purchasers continue to deploy excessive leverage, creating ideal conditions for another leg of decline.
There is still a significant correlation between the price of Bitcoin and conventional stock markets. Nevertheless, the combination of sluggish macroeconomic data and the uncertainty introduced by crypto auditing businesses increases the likelihood that Bitcoin will revisit $16,000.