The long/short ratio of major traders and stronger demand for stablecoins in Asia indicate a higher likelihood of another price correction.
fell below $16,800 on Dec 16, hitting its lowest level in more than two weeks. More importantly, the move was a complete reversal of the current excitement that led to its high of $18,370 on December 14th.
Curiously, Bitcoin fell 3.8% in seven days, compared to the S&P 500 index’s 3.5% decline over the same period. So, on the one hand, bitcoin bulls take comfort in knowing that correlation has played a key role. At the same time, however, he had $206 million worth of BTC futures contracts liquidated on Dec. 15.
Some embarrassing economic data from the auto loan sector has worried investors as the default rate among the lowest-income consumers is now above 2019 levels. Concerns surfaced after the average monthly payment for a new car hit $718, up 26% in three years.
In addition, central banks in the United States, England, the European Union and Switzerland hiked interest rates by 50 basis points to a multi-year high, emphasizing that borrowing costs were likely to persist. longer than the market had hoped.
Uncertainty in the cryptocurrency markets has resurfaced after two of the most prominent auditors suddenly ceased their services and exchanges were put on hold. French auditing firm Mazars Group, which has previously worked with exchanges like Binance, KuCoin and Crypto.com, has removed a section on crypto audits from its website.
Meanwhile, auditing firm Armanino has also reportedly suspended its crypto auditing services. The auditor has worked with several crypto trading platforms such as OKX, Gate.io and the struggling FTX exchange. Curiously, Armanino was the first accounting firm to establish relationships in the crypto industry back in 2014.
Let’s take a look at derivatives metrics to better understand how professional traders position themselves in the current market conditions.
Asia stablecoin premium falls to a 2-month low
The coin in USD
Premium is a good indicator of demand from China-based crypto retailers. It measures the difference between China-based peer-to-peer transactions and the US dollar.
Excessive buying demand tends to push the indicator above the 100% fair value, and during bear markets the stablecoin market supply is flooded, resulting in a discount of 4% or more. .
USDC peer to peer vs USD/CNY. Source: OKX
Currently, the USDC premium is at 101.8%, up from 99% on Dec. 12, indicating increased demand for stablecoin purchases from Asian investors. The data has gained relevance after the sharp correction of 9.7% in five days since the Dec. 14 peak of $18,370.
This indicator shouldn’t necessarily be taken as bullish, however, as the stablecoin could have been purchased to hedge against downside risks to the cryptocurrency, meaning investors are turning bearish.
Leverage buyers slowly threw in the towel
The long-to-short metric excludes externalities that may have impacted the stablecoin market alone. It also aggregates data from on-site client positions, perpetual and quarterly futures contracts, providing better positioning insights for professional traders.
There are sometimes methodological discrepancies between different exchanges, so readers should pay attention to changes rather than absolute numbers.
The major bitcoin traders are swapping the long to short ratio. Source: coin jar
As Bitcoin broke below the $16,800 support, professional traders reduced their leveraged long positions according to the long to short indicator.
For example, the Binance Trader Ratio has fallen slightly from 1.11 on December 14 to the current level of 1.04. Meanwhile, Huobi showed a slight decline in its long/short ratio, with the indicator falling from 1.01 to 0.05 over the same period.
Finally, on the OKX exchange, the ratio fell from 1.00 on Dec. 14 to the current ratio of 0.98. So, on average, traders have reduced their long leverage ratio over the past five days, indicating a lower level of confidence in the market.
A possible retest of $16,000 is likely