Bitcoin (BTC) experienced a significant 8.4% increase between May 15 and May 16, reaching a peak of $66,750. This was the highest level it had reached in three weeks. Although Bitcoin stabilized around $65,000, this price change marked a turnaround after BTC tested the $57,000 support on May 1. However, despite these gains, Bitcoin derivatives metrics suggest that there is still a lack of bullishness in the market.
One reason for Bitcoin investors’ disappointment may be the strong performance of traditional assets. The S&P 500 index reached an all-time high on May 16, with a total gain of 6% over 15 days. Similarly, gold saw a 4% increase during the same period and is currently trading at $2,375, just 1% below its highest closing price ever.
For Bitcoin to reclaim its highest closing price of $73,084, it would need to rally another 12%. However, this seems unlikely as the primary driver of price, spot Bitcoin exchange-traded funds (ETFs) inflows, has faded. These ETFs attracted $12.1 billion in investments since their launch in January but have stagnated over the past two months.
The worsening regulatory environment, particularly in the U.S., may explain why investors are hesitant to buy Bitcoin using derivatives despite its recent price strength. The U.S. Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam warned on May 6 that further enforcement actions would be taken against the crypto ecosystem in the next six months to two years. Additionally, there are multiple pending cases against crypto firms, including Binance, Coinbase, and Kraken. Recent enforcement actions against privacy-focused services and broker-dealers like Robinhood have also contributed to the uncertainty. The lack of a clear legislative framework and jurisdictional clarity limits the interest of Bitcoin investors.
Furthermore, cryptocurrencies received negative media attention following the arrest of 193 suspects in China for money laundering using stablecoins. Authorities alleged that these individuals transferred $1.9 billion using stablecoins to smuggle items and make investments overseas. Additionally, a couple of U.S. Senators requested an investigation into the use of cryptocurrencies to fund terrorist organizations in the Middle East.
Despite the rally above $66,000, Bitcoin derivatives remain flat. To gauge the sentiment of whales, it is important to analyze data from BTC futures markets. The long-to-short ratio of top traders on exchanges like OKX and Binance indicates a less optimistic stance compared to May 14. This suggests that bulls and bears have roughly equal positions and that confidence in the market remains low.
To assess the appetite of retail traders, perpetual futures contracts should be examined. The funding rate for Bitcoin perpetual futures has stayed below 0.01% for the past month, indicating balanced demand between longs and shorts. This further supports the notion that retail traders lack confidence in placing bullish bets.
Overall, the regulatory uncertainty continues to impact the confidence of investors. However, if Bitcoin manages to break above $68,000, it could catch traders by surprise and potentially fuel a rally as there is room for bullish leverage. It should be noted that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any decisions.