Bitcoin Stagnates As Bearish Pressures Persist

Bitcoin’s price has declined as interest in leveraged long BTC futures and stablecoins diminishes. 

Source: ekonomimanset.com

Since August 8, Bitcoin has been trading within a narrow range, unable to break above $62,000 while maintaining support around $58,000. This period of consolidation highlights increasing uncertainty among traders, particularly as the BTC futures funding rate remains negative, signaling weak demand for leverage among buyers. The key question is whether this indicator alone can determine the direction of the cryptocurrency market or if historical trends hint at a potential rally.

The S&P 500 and Gold Are Nearing ATH While BTC Struggles to Maintain Momentum

A major concern for Bitcoin investors is the strong performance of the S&P 500 index, which is currently just 2.5% off its all time high, and gold, which is trading only 1% below its peak. In this context, Bitcoin’s current position 19.5% below its March 14 peak of $73,757 seems difficult to justify, whether Bitcoin is seen as a risk on asset or a hedge against potential disruptions in the US debt situation. Investor sentiment towards Bitcoin has also been affected by the lack of a clear position on cryptocurrency from Democratic presidential nominee Kamala Harris, who has only made vague statements about the industry. On the other hand, Republican nominee Donald Trump has proposed removing Gary Gensler from his role as Chair of the US Securities and Exchange Commission (SEC). Industry leaders have criticized Gensler for not providing a clear regulatory framework for crypto companies in the US.

Recent economic data, which supports the Federal Reserve's success in controlling inflation without causing a recession, may have further dampened interest in Bitcoin. US retail sales increased by 1% in July, exceeding economists' expectations of a 0.4% rise. Additionally, the Department of Labor reported 7,000 fewer initial jobless claims compared to the previous week. Yung Yu Ma, Chief Investment Officer at BMO Wealth Management US, told Yahoo Finance that a soft landing is firmly in place. A stronger macroeconomic environment boosts the stock market and reduces Bitcoin's appeal as an independent store of value.

From a trading perspective, demand for leverage through BTC futures contracts is a crucial indicator of investor confidence. In optimistic market conditions, bullish investors typically take on leveraged positions, driving the funding rate on perpetual contracts into positive territory. Funding rates between 0.2% and 1.2% per month usually indicate neutral market conditions, while rates below this range are seen as bearish. Data indicates that the Bitcoin perpetual futures funding rate was largely negative on August 14 and 15. The last time this indicator approached bullish levels was on June 8, when Bitcoin’s price tested the $72,000 resistance. This trend makes sense, as perpetual futures are the favored leverage tool for retail traders, while monthly contracts, which require rollovers, often trade at a premium or discount compared to spot markets.

To assess whether the decline in buyer confidence is specific to perpetual futures or more widespread, it’s essential to also look at stablecoin demand in China markets. Strong retail demand for cryptocurrencies usually leads to stablecoins trading at a premium of 2% or more above the official US dollar rate. On the other hand, a discount typically indicates fear, as traders look to exit the crypto markets. On August 15, USD Tether (USDT) was trading at a 0.2% discount in China which is suggesting a reduced appetite for cryptocurrencies. This is a significant change from August 6, when traders were willing to pay a 2% premium for USDT, marking the lowest level for this indicator in three months. Given the current BTC derivatives metrics and stablecoin demand in China, Bitcoin faces a tough challenge in regaining the $62,000 support level. However, history shows that retail traders tend to respond to market shifts rather than predict them, leaving the possibility of a breakout still on the table.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.