After a failed rally above $31,000 on June 23, Bitcoin (BTC) has been holding the $30,300 resistance for the past three days. Curiously, this happened while gold hit its lowest level in three months, trading at $1,910 on June 22 after peaking at $2,050 in early May.
Investors are now wondering how solid Bitcoin’s $30,000 support is. Therefore, it is important to analyze what caused the recent price surge in order to understand how traders are positioned in the BTC margin and futures markets.
Why Did BTC Price Break Above $30,000?
Some analysts attribute Bitcoin’s recent 21.5% 11-day gains to BlackRock’s spot filing of the Bitcoin Exchange Traded Fund (ETF). But other events may have fueled cryptocurrency gains as well. For example, HSBC Bank in Hong Kong reportedly launched its first local cryptocurrency services on June 26 with three listed crypto ETFs.
Additionally, ProShares Bitcoin Strategy ETF, a bitcoin futures fund, saw its largest weekly inflow in a year at $65 million, with its assets topping $1 billion. It was the first BTC-pegged ETF in the United States and is one of the most popular among institutional investors.
More importantly, the regulatory environment for cryptocurrencies in the U.S. may be improving after a period marked by enforcement actions by the Securities and Exchange Commission (SEC) targeting exchanges allegedly operating as unregistered securities brokers.
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On June 25, Federal Reserve Governor Michelle Bowman said financial institutions have remained in a “regulatory loophole” when it comes to new technologies, including digital assets. Bowman added that policymakers are relying on “general but non-binding statements,” creating significant uncertainty and imposing new business requirements after significant investments have been made.
Along these lines, a bill in the US House of Representatives aims to prohibit the SEC from refusing digital asset trading platforms as a regulated alternative trading facility. The proposed law, released on June 2, would allow such companies to offer “digital goods and payment stablecoins.”
Bitcoin margin and futures point to uptrend
Now let’s look at the Bitcoin derivatives metrics to better understand how professional traders are positioned in the face of improved regulatory prospects and significant institutional inflow.
Margin markets provide insight into how professional traders are positioned as they allow investors to borrow cryptocurrencies to leverage their positions.
For example, OKX offers a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy bitcoin. On the other hand, Bitcoin borrowers can only bet on the fall in the price of a cryptocurrency.
OKX stablecoin/BTC margin lending ratio. Source: OKX
The chart above shows that OKX traders’ margin-lending ratio bottomed at 17 on June 20, but has improved over the past four days. The move suggests that margin long positions are dominant as the current 24x ratio favors bullish stablecoin lending.
Still, investors should analyze the long-to-short metric for bitcoin futures, which excludes externalities that may have only impacted the margin markets.
Bitcoin long-to-short ratio of exchanges top traders. Source: CoinGlass
There are occasional methodological discrepancies between exchanges, so readers should focus on changes rather than absolute numbers.
Top traders at Huobi significantly increased their long positions between June 22-24 as bitcoin price broke the $30,000 resistance.
On the other hand, on June 22nd and 23rd, OXK’s top traders initially increased their short positions but subsequently reversed their positions by adding bullish bets.
Finally, on June 21st, the top traders on Binance started building long positions and continued to increase their bullish positions until June 23rd.
Bitcoin’s $30,000 support is showing strength
Overall, bitcoin bulls have built leveraged long positions using margin and futures markets, bolstered by positive momentum from multiple spot bitcoin ETF requests, strong institutional inflows, and a more rational approach from US lawmakers.
The SEC’s regulate-by-enforcement approach does not have the support of some Federal Reserve governors and has met with fierce backlash in the US House of Representatives. For example, Rep. Warren Davidson introduced the SEC Stabilization Act, citing “continued abuse of power” and calling for Gary Gensler to be removed as SEC chairman.
Given the benign scenario for cryptocurrencies, bitcoin bulls should now have the upper hand to sustain the $30,000 BTC price support level in the coming weeks.
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risk and readers should do their own research in making their decision.