Stablecoin data points to ‘healthy appetite’ from bulls and possible Bitcoin rally to $25K

Please fol­low and like us:
Pin Share

Bit­coin (BTC) ral­lied 11% between Jan. 20 and Jan. 21, reach­ing the $23,000 lev­el and shat­ter­ing bears’ expec­ta­tions for a pull­back to $20,000. Even more notable is the move brought demand from Asia-based retail investors accord­ing to data from a key sta­ble­coin pre­mi­um indicator.

Traders should note that the tech-heavy Nas­daq-100 index also gained 5.1% between Jan. 20 and Jan. 23, fueled by investors’ hope in Chi­na reopen­ing for busi­ness after tem­po­rary shut­downs caused by the CCP’s virus con­ta­gion mea­sures and weak­er than expect­ed eco­nom­ic data in the U.S. and the Eurozone.

Anoth­er bit of bull­ish infor­ma­tion came on Jan. 20 after U.S. Fed­er­al Reserve gov­er­nor Christo­pher Waller rein­forced the mar­ket expec­ta­tion of a 25 basis point inter­est rate increase in Feb­ru­ary. A hand­ful of heavy­weight com­pa­nies are expect­ed to report their lat­est quar­ter­ly earn­ings this week to com­plete the puz­zle, includ­ing Microsoft, IBM, Visa, Tes­la and Mastercard.

In essence, the cen­tral bank is aim­ing for a “soft land­ing,” or a con­trolled decline of the econ­o­my, includ­ing job open­ings and infla­tion. How­ev­er, if com­pa­nies strug­gle with their bal­ance sheets due to the increased cost of cap­i­tal, earn­ings tend to nose­dive, and ulti­mate­ly the lay­offs will be much high­er than anticipated.

On Jan. 23, on-chain ana­lyt­ics firm Glassnode point­ed out that long-term Bit­coin investors held los­ing posi­tions for over a year, so those are like­ly more resilient to future adverse price movements.

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

The Asia-based stablecoin premium nears the FOMO area

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 103%, and dur­ing bear­ish mar­kets, the sta­ble­coin’s mar­ket offer is flood­ed, caus­ing a 4% or high­er discount.

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

Cur­rent­ly, the USDC pre­mi­um stands at 103.5%, up from 98.7% on Jan. 19, sig­nal­ing high­er demand for sta­ble­coin buy­ing from Asian investors. The move­ment coin­cid­ed with Bit­coin’s 11% dai­ly gain on Jan. 20 and indi­cates mod­er­ate FOMO by retail traders as BTC price approached $23,000.

Pro traders are not particularly excited after the recent gain

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.

Exchanges’ top traders Bit­coin long-to-short ratio. Source: Coinglass

The first trend one can spot is Huo­bi and Binance’s top traders being extreme­ly skep­ti­cal of the recent ral­ly. Those whales and mar­ket mak­ers did not change their long-to-short lev­els over the last week, mean­ing they are not con­fi­dent about buy­ing above $20,500, but they are unwill­ing to open short (bear) positions.

Inter­est­ing­ly, top traders at OKX reduced their net longs (bull) until Jan. 20 but dras­ti­cal­ly changed their posi­tions dur­ing the lat­est phase of the bull run. Look­ing at a longer 3‑week time frame, their cur­rent 1.05 long-to-short ratio remains low­er than the 1.18 seen on Jan. 7.

Relat­ed: Bit­coin min­ers’ worst days may have passed, but a few key hur­dles remain

Bears are shy, providing an excellent opportunity for bull runs

The 3.5% sta­ble­coin pre­mi­um in Asia indi­cates a high­er appetite from retail traders. Addi­tion­al­ly, the top traders’ long-to-short indi­ca­tor shows no demand increase from shorts even as Bit­coin reached its high­est lev­el since Aug. 2022.

Fur­ther­more, the $335 mil­lion liq­ui­da­tion in short (bear) BTC futures con­tracts between Jan. 19 and Jan. 20 sig­nals that sell­ers con­tin­ue to use exces­sive lever­age, set­ting up the per­fect storm for anoth­er leg of the bull run.

Unfor­tu­nate­ly, Bit­coin price con­tin­ues to be heav­i­ly depen­dent on the per­for­mance of stock mar­kets. Con­sid­er­ing how resilient BTC has been dur­ing the uncer­tain­ties regard­ing the Dig­i­tal Cur­ren­cy Group (DCG) bank­rupt­cy, the odds favor a ral­ly toward $24,000 or $25,000.

The views, thoughts and opin­ions expressed here are the authors’ alone and do not nec­es­sar­i­ly reflect or rep­re­sent the views and opin­ions of Cointelegraph. 

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. 

Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *