Bitcoin (BTC) price reclaimed the $30,000 support on April 18 after briefly testing $29,130 the previous day. However, traders doubt the recovery is sustainable amid increased regulatory scrutiny, particularly in the United States.
Bitcoin price in USD, 4 hours. Source: TradingView
Rostin Behnam, the chairman of the Commodity Futures Trading Commission (CFTC), said on April 14 that Binance intentionally violated US rules regarding futures and commodities trading. For example, he said it knowingly allows US citizens to trade on the stock exchange through the use of obfuscation tools. The comments stem from the CFTC’s March 27 lawsuit against Binance and its CEO, Changpeng “CZ” Zhao, for alleged trading violations.
Also on April 14, SEC Chairman Gary Gensler said in an open meeting with commissioners and staff at the US Securities and Exchange that the agency would reconsider the proposed redefinition of an “exchange.” The SEC intends to subject certain brokers to additional regulatory scrutiny and explicitly include decentralized applications.
On April 17, the US Securities and Exchange Commission accused crypto-asset trading platform Bittrex and former CEO William Shihara of allegedly operating an unregistered securities exchange, broker, and clearing agency. Separately, Bittrex Global will be charged for operating a shared order book with Bittrex.
Bittrex had already announced its intention to shut down its US operations on April 30, after reportedly receiving a notice from Wells in March warning of upcoming regulatory action.
Other countries take different paths
The regulatory environment in Hong Kong appears to have improved after China’s state-affiliated banks started onboarding crypto companies. Alongside the Bank of Communications, ZA Bank – Hong Kong’s largest virtual bank controlled by a Chinese internet insurer – will also act as a settlement bank for some crypto companies.
According to a Wall Street Journal report, these banks will serve as settlement banks for token deposits to be withdrawn in authorized exchanges in Hong Kong dollars, Chinese yuan and US dollars.
Argentina’s securities regulator also approved a bitcoin-based futures index on April 12. The regulated derivative contract offers qualified investors a safe and regulated way to gain exposure to BTC. All trades are settled in the national fiat currency, with traders required to deposit Argentine pesos via bank transfer.
To understand how professional traders are positioned, traders should analyze the options markets.
Options traders tend towards bearish structures
Traders can gauge market sentiment by measuring whether there is more activity through call (buy) options or put (sell) options. In general, call options are used for bullish strategies while put options are used for bearish strategies.
A put-to-call ratio of 0.70 indicates that the put option’s open interest is lagging behind the larger number of call options. In contrast, an indicator of 1.40 favors put options, which is a bearish sign.
BTC option volume put-to-call ratio. Source: Laevitas
As of April 5, Bitcoin’s put-to-call ratio is either balanced or favoring protective put options. The current indicator of 0.60 shows slightly higher demand for neutral to bearish option strategies, although nothing out of the ordinary.
To confirm whether traders are indeed turning bearish, one should also analyze the bitcoin futures markets.
Bitcoin futures metrics remain neutral to bearish
Quarterly bitcoin futures are popular with whales and arbitrage desks. These fixed-term contracts typically trade at a slight premium to spot markets, suggesting that sellers are asking for more money to delay settlement for a longer period of time.
As a result, futures contracts should trade at a 5% to 10% annual premium in healthy markets — a situation known as contango, which isn’t unique to crypto markets.
Related: Bitcoin “megawhales” push BTC price to $30,000 as volatility hits crypto
Bitcoin 3 month futures annualized premium. Source: Laevitas.ch
The chart shows that traders have been neutral to bearish over the past two weeks as the base indicator has fluctuated between 2.4% and 4.3%. This data should come as no surprise as bitcoin price remains 56% below its all-time high of $69,000.
Bitcoin’s margin and futures markets reflect neutral to bearish sentiment, but nothing exaggerated. The fall in demand from bullish strategies likely reflects Bitcoin’s 50% gains since March 11th.
However, investors fear that regulatory action could dampen demand for retail and institutional customers, leaving the chances of Bitcoin breaking above $31,000 slim unless there is more clarity on this front.
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
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