Connect with us

Cryptocurrency

$16K Retest Bitcoin’s Most Likely Path, According to Derivative2 Metrics

Published

on

bitcoin (BTC) fell below $16,800 on December 16, reaching its lowest level in more than two weeks. More importantly, the move was a complete turnaround from the intraday excitement that led to a peak of $18,370 on December 14th.

Oddly enough, bitcoin is down 3.8% in seven days, compared to the S&P 500 falling 3.5% in the same period. So on the one hand, the bitcoin bulls take some comfort in knowing that correlation played a major role; At the same time, it secured $206 million in Bitcoin futures contracts filtered on December 15th.

Some disturbing economic data From The auto loan industry has made investors uncomfortable that the default rate from lower-income consumers now exceeds 2019 levels. Concerns arose after the average monthly payment for a new car reached $718, a 26% increase in three years.

Moreover, along with the Bank of England, two central banks have increased interest rates by 50 basis points to multi-year peaks – highlighting that borrowing costs are likely to continue rising for longer than the market had hoped.

Uncertainty emerged in the cryptocurrency markets after two notable ones The reviewers suddenly dropped their services, leaving the exchanges pending. For example, the website of the French auditing firm Mazars Group is not online. The company has previously worked with several exchanges, including Binance, KuCoin, and Crypto.com.

Meanwhile, accounting firm Armanino has reportedly terminated its cryptocurrency auditing services. The auditor has worked with several cryptocurrency exchanges such as OKX, Gate.io and the troubled FTX exchange. Oddly enough, Armanino was the first accounting firm to establish ties in the cryptocurrency industry, dating back to 2014.

Let’s take a look at derivative metrics to better understand how professional traders fare in the current market conditions.

The stablecoin premium in Asia drops to a two-month low

US dollar currency (USDCThe premium is a good measure of retail demand for cryptocurrency in China. It measures the difference between peer-to-peer trades based in China and the United States dollar.

Excessive buying tends to pressure the index above the fair value at 100%, and during bear markets it overwhelms the supply of the stablecoin market, causing a discount of 4% or higher.

USDC is peer-to-peer against USD/CNY. Source: OKX

Currently, the USD premium stands at 101.8%, up from 99% on December 12, indicating high demand for buying stablecoins from Asian investors. The data gained importance after the brutal 9.7% correction in five days since the $18,370 peak on December 14th.

However, this indicator should not necessarily be considered bullish because the stablecoin could have been acquired to protect against downside risks in cryptocurrencies – which means that investors are becoming more bearish.

Take advantage of buyers who have been slowly thrown in the towel

The long to short scale excludes external factors that may only affect the stablecoin market. It also collects data from clients’ positions traded in spot, perpetual and quarterly futures contracts, thus providing better information on how professional traders are positioned.

There are occasional methodological inconsistencies between different exchanges, so readers should keep an eye on changes rather than absolute numbers.

Major exchange traders is long to short ratio of Bitcoin. Source: Coinglass

With Bitcoin breaking below the $16,800 support, professional traders reduced leveraged long positions according to the index long to short.

For example, the Binance trader ratio decreased slightly from 1.11 on December 14 to the current level of 1.04. Meanwhile, Huobi showed a slight decrease in the buy-to-sell ratio, with the index moving from 1.01 to 0.05 in the same period.

Finally, on the OKX exchange, the scale fell from 1.00 on December 14 to the current ratio of 0.98. So, on average, traders have reduced their long leverage ratio over the past 5 days, which indicates a decrease in market confidence.

It is likely that the $16,000 will be retested

Moderate stablecoin premiums of 101.8% in Asia, paired with bearish information for long-to-short traders, tells the story of buyers gradually ceding pessimism.

Moreover, the liquidation of $206 million in long Bitcoin futures indicates that buyers continue to use excessive leverage, making the perfect storm for another part of the correction.

For now, the Bitcoin price is still very dependent on the traditional stock markets. However, weak macroeconomic data and uncertainty caused by cryptocurrency auditing firms suggest higher odds for a retest of $16,000 in Bitcoin.

The views, ideas and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.