Top traders’ long-to-short ratio and Asian stablecoin demand suggest further price correction.
Bitcoin fell below $16,800 on Dec. 16. More importantly, the movement reversed the momentary excitement that had led to the $18,370 peak on Dec. 14.
Bitcoin fell 3.8% in seven days, while the S&P 500 Index fell 3.5%. Correlation was important, but it also liquidated $206 million of BTC futures contracts on Dec. 15.
As auto loan defaults from low-income consumers exceed 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, signalling that borrowing costs would likely rise longer than the market expected.
Two major auditors abruptly left exchanges, reintroducing market uncertainty. Mazars Group, a French auditing firm that worked with Binance, KuCoin, and Crypto.com, removed its crypto audit section from its website.
Armanino, an accounting firm, also stopped crypto auditing. OKX, Gate.io, and the troubled FTX exchange were audited by the auditor. In 2014, Armanino was the first accounting firm to build crypto industry relationships.
Derivatives metrics will help us understand professional traders’ market positions.
The USD Coin premium indicates Chinese crypto retail trader demand. It compares Chinese peer-to-peer trades to the dollar.
In bearish markets, the stablecoin’s market offer is flooded, causing a 4% or higher discount. Excessive buying demand pushes the indicator above 100%.
Asian investors are buying stablecoins at 101.8%, up from 99% on Dec. 12. After the brutal 9.7% correction in five days since the $18,370 peak on Dec. 14, the data became relevant.
However, investors may have bought the stablecoin to hedge against cryptocurrency losses, making this indicator bearish.
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 figures due to methodological differences between exchanges.
The long-to-short indicator showed professional traders reducing leverage long positions as 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 metric dropped from 1.00 on Dec. 14 to 0.98. Over the past five days, traders have reduced their leverage-long ratio, indicating lower market confidence.
The Asian stablecoin premium’s moderate 101.8% and top traders’ long-to-short indicator decline indicate buyers’ gradual pessimism.
The $206 million liquidation in long BTC futures contracts shows that buyers continue to use excessive leverage, creating the perfect storm for another correction.
Bitcoin is still heavily influenced by stock markets. Still, weak macroeconomic data and crypto auditing uncertainty suggest a $16,000 Bitcoin retest.
