Bitcoin (BTC) rallied 11% between January 20 and January 21, reaching the level of $23,000 and shattering the bear’s expectations for a pullback to $20,000. More importantly, the move brought demand from retail investors in Asia according to data from key stablecoin premium indicators.
Traders should note that the technology-heavy Nasdaq-100 index also gained 5.1% between January 20 and January 23, supported by investors’ hopes that China will reopen for business after a temporary shutdown caused by the CCP’s virus-contagion measures and the economy which is weaker than expected. data in the US and the Euro zone.
More bullish information came on January 20 after US Federal Reserve governor Christopher Waller reinforced market expectations of a 25 basis point interest rate hike in February. Several heavyweights are expected to report their latest quarterly earnings this week to solve the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.
In essence, the central bank is aiming for a “soft landing,” or controlled reduction of the economy, including job vacancies and inflation. However, if a company struggles with its balance sheet due to increased capital costs, earnings tend to nosedive, and ultimately layoffs will be higher than anticipated.
On January 23, on-chain analytics company, Glassnode, stated that long-term Bitcoin investors are holding losing positions for more than a year, so they may be more resistant to adverse price movements in the future.
Let’s take a look at derivative metrics to better understand how professional traders are positioned in current market conditions.
Asia-based stablecoin premium is approaching FOMO territory
Premium USD Coin (USDC) is a good measure of demand for China-based crypto retail traders. It measures the difference between China-based peer-to-peer trade and the United States dollar.
Heavy buying demand tends to push the indicator above its fair value at 103%, and during bearish markets, stablecoin market offers are flooded, resulting in discounts of 4% or higher.
Currently, the USDC premium is at 103.5%, up from 98.7% on January 19, signaling higher demand for stablecoin purchases from Asian investors. The move coincides with Bitcoin’s 11% daily gain on January 20 and indicates moderate FOMO by retail traders as the price of BTC approaches $23,000.
Pro traders are not very happy after their recent gains
The long-to-short metric excludes externalities that can only impact the stablecoin market. It also collects data from exchange clients’ positions in futures, forward, and quarter contracts, thus providing better information about the positions of professional traders.
There are occasional methodological differences between different exchanges, so readers should keep an eye on changes rather than absolute numbers.
The first trend we can see is that the top traders of Huobi and Binance are very skeptical about the new rally. The whales and the market makers did not change their long to short levels during the last week, which means that they are not sure about buying above $20,500, but they are not willing to open a short (bear) position.
Interestingly, the top traders on OKX reduced their net longs (bulls) through January 20 but changed positions drastically during the latest phase of the bull run. Looking at the longer 3-week time frame, the current long-to-short ratio of 1.05 remains lower than the 1.18 seen on January 7th.
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Bears are shy, providing a good opportunity to run the bulls
The stablecoin premium of 3.5% in Asia indicates higher appetite from retail traders. In addition, the top trader’s long-to-short indicator shows no increase in demand from shorts despite Bitcoin reaching its highest level since August 2022.
Furthermore, the liquidation of $335 million in short (bear) BTC futures contracts between January 19 and January 20 signaled that sellers continued to use excessive leverage, setting up the perfect storm for another bull leg.
Unfortunately, the price of Bitcoin continues to be highly dependent on the performance of the stock market. Considering how BTC has held up during the uncertainty surrounding the Digital Currency Group (DCG) bankruptcy, it is likely to favor a rally towards $24,000 or $25,000.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.