Bitcoin traders are currently unhappy with the recent price trend, especially due to the price’s inability to clear the $30,500 mark over the past four weeks. This frustration is exacerbated by the fact that many orders for bitcoin exchange-traded funds (ETFs) are either in arrears or awaiting review from regulators.
Interestingly, there has been a significant rise in open interest in Bitcoin futures contracts, likely indicating increased demand from institutional traders. On the other hand, activity in the derivatives markets was lackluster. This divergence in market dynamics has created mixed feelings among investors, making it difficult to gather enough momentum to trade at or above the $31,000 level.
The main factor cited by many analysts for the lack of buyers driving Bitcoin (BTC) above the $30,000 mark is the reports surrounding the US Department of Justice looking into fraud charges against Binance. In addition, the US Securities and Exchange Commission and the CFTC currently have their own legal action against the exchange and its founder, Changpeng “CZ” Zhao.
Macroeconomic forces partly explain the unease of bitcoin investors
With a broader view of the situation, there is additional concern about a potential global recession caused by central banks’ efforts to control inflation. The most recent US core CPI figure, which excludes food and gas prices, rose 4.7% year-on-year, following a 4.8% increase in June. These data support the ongoing initiatives to tighten the economy, favoring investments in short-term and fixed-income bonds and cash positions.
As a result, despite the consensus that the Fed is expected to maintain its interest rate ceiling at 5.5% during the upcoming September meeting, investors lack incentive to increase their positions in risk markets. This reluctance stems from the increasing likelihood of a recession, evidenced by the 1.4% decline in Eurozone retail sales on an annual basis in June and the US ISM Manufacturing PMI of 46.4 in July, indicating a deflationary situation.
When examining price as an indicator, it becomes clear that bitcoin investors do not currently show much confidence in the near-term prospect of approval for a spot ETF. At the same time, there is a noticeable sense of pessimism surrounding the ongoing legal challenges Binance faces and the potential repercussions of these challenges. Regardless of the specific reason, the overall Bitcoin price trend over the past 50 days has been mostly negative, with frequent visits near the $29,000 support level.
Bitcoin derivatives are very important for price guidance
The Bitcoin futures market is very important in the trading landscape. This market includes crypto-exclusive derivatives exchanges such as Binance, Bybit, and OKX, as well as well-established traditional financial platforms such as the Chicago Mercantile Exchange. In essence, futures contracts are financial agreements between two parties where no actual BTC changes hands. However, the allure of leverage enables this market to exceed the trading volumes normally seen in regular buying and selling.
According to data from CoinGlass, on August 8, trading activity within this market rose to nearly $14.5 billion, approaching levels reminiscent of those observed in May 2022. It can be said that these contracts are constantly balanced between buyers (long contracts) and sellers (shorts). short). However, the expansion of this market allows large-scale investors to participate and attracts traders who use different strategies, including the “cash and carry” approach, and miners who seek to mitigate risk.
However, the increasing number of active contracts, as evidenced by open interest, does not necessarily imply increased trading activity in the futures market. In fact, the volume associated with Bitcoin futures has seen a downward trajectory over the past seven months.
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Recent data indicates that trading volumes for bitcoin futures have fallen to their lowest levels since December 2022, averaging less than $7 billion per day. This indicates that traders are either completely protected from risk and disinclined to make further moves at current price levels or that they have shifted their focus to other markets with higher volatility or better prospects for major changes.
The situation boils down to this: until there is some clear confirmation about the ETF’s decision and more specific rules around exchanges like Binance and Coinbase due to their clashes with regulators, Bitcoin derivatives traders don’t seem to have much motivation to make more trades. These important events, along with the uncertainty in the broader economy, provide an explanation for the decline in trading activity, although more people are watching the situation and the price is stuck around $29,500.
This article is for general information purposes and is not intended and should not be considered legal or investment advice. The views, ideas and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.