Bitcoin (BTC) price broke above $25,000 on February 21, marking a 53% year-to-date gain. At that time, it is reasonable to expect the meeting to continue after the US sales data from last week exceeded the market’s opinion. This has fueled investors’ hopes for a soft landing and a possible recession in the US economy.
The pinnacle of the US Federal Reserve’s strategy will be to increase interest rates and restore the $9 trillion balance sheet deficit without damaging the economy. If this miracle happens, the results will benefit risk assets, including stocks, commodities and Bitcoin.
Unfortunately, the cryptocurrency markets took a hit after the $25,200 level was rejected and the Bitcoin price collapsed 10% between February 21 and February 24. The pressure of the system, mainly from the United States, partially explained the investors’ sense of the worsening market conditions.
In an interview with New York Magazine on February 23, Securities and Exchange Commission Chairman Gary Gensler claimed “anything but Bitcoin” is potentially a security asset and is subject to the agency’s jurisdiction. However, many lawyers and policy analysts commented that Gensler’s opinion was “not legal.” Therefore, the SEC has no authority to regulate cryptocurrencies unless it proves its case in court.
Additionally, at the G20 meeting, US Treasury Secretary Janet Yellen emphasized the importance of implementing a strong regulatory framework for cryptocurrencies. Yellen’s comments on February 25 followed IMF chief Kristalina Georgieva suggesting that “if the system fails,” then the ban “shouldn’t be taken off the table.”
Let’s take a look at the Bitcoin index to better understand how professional traders are positioned in the current market environment.
Asia-based stablecoin demand has stagnated
Traders should turn to the US dollar (USDC) rate to gauge cryptocurrency demand in Asia. The index measures the difference between the human-to-peer trading stablecoin based in China and the US dollar.
The high demand to buy cryptocurrency can push the indicator above the true value at 104%. On the other hand, stablecoin trading offers flood during bearish markets, resulting in discounts of 4% or higher.
After peaking at 4% in late January, the USDC benchmark in Asian markets declined to a neutral 2%. The metric has since settled on a low of 2.5%, which should be interpreted as positive given the recent FUD.
BTC futures are stuck even after the price was rejected at $25,000
Quarterly Bitcoin futures are the favorite tools of whales and arbitrage tables. Because of their settlement dates and price differences from spot markets, they can be difficult for traders. However, their main advantage is that the amount does not change.
These fixed-month contracts often trade at a fraction of the price to spot markets, indicating that sellers are seeking more money to prevent arbitrage. As a result, futures markets should trade at a 5% to 10% annual rate over healthy markets. This situation is called contango and is not unique to crypto markets.
The chart shows traders flirting with a neutral point between February 19 and February 24 as the price of Bitcoin was above $23,750. However, the indicator failed to enter the intermediate range of 0% to 5% as more structural uncertainty was added, especially after Gensler’s comments on February 23. price reduction of over $25,000.
Related: Is the SEC action on BUSD more about Binance than stablecoins?
Low economic data has shifted power to the bulls
Since February 25, the price of Bitcoin has gained 4.5%, indicating that the impact of the planned news is limited. More importantly, global stock markets reacted positively on February 27 after the US Commerce Department reported durable goods orders fell 4.5% in January compared to the previous month. past This data has increased pressure on the Fed to reduce interest rate hikes earlier than expected.
Since Bitcoin’s 50-day correlation with S&P 500 futures currently stands at 83%, cryptocurrency traders are more inclined to support a strong asset price increase during the week. A correlation indicator above 70% indicates that both assets are moving in the same direction, meaning that economic conditions can play an important role in determining the overall trend.
Unless there is more pressure from regulators or conflicting economic data, the odds favor Bitcoin bulls given BTC futures and Asian stability metrics.
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