Looking at the Bitcoin chart from a weekly or daily perspective presents a bearish outlook and it’s clear that (BTC) price has been consistently making lower lows since hitting an all-time high at $69,000.
Bitcoin/USD on FTX. Source: TradingView
Curiously, the Nov. 10 price peak happened right as the United States announced that inflation has hit a 30-year high, but, the mood quickly reversed after fears related to China-based real estate developer Evergrande defaulting on its loans. This appears to have impacted the broader market structure.
Traders are still afraid of stablecoin regulation
This initial corrective phase was quickly followed by relentless pressure from regulators and policy makers on stablecoin issuers. First came VanEck’s spot Bitcoin ETF rejection by the U.S. Securities and Exchange Commission on Nov. 12. The denial was directly related to the view that Tether’s (USDT) stablecoin was not solvent and concerns over Bitcoin’s price manipulation.
On Dec. 14, the U.S. Banking, Housing and Urban Affairs Committee held a hearing on stablecoins focused on consumer protection and their risks and on Dec. 17, the U.S. Financial Stability Oversight Council (FSOC) voiced its concern over stablecoin adoption and other digital assets. “The Council recommends that state and federal regulators review available regulations and tools that could be applied to digital assets,” said the report.
The worsening mood from investors was reflected in the CME’s Bitcoin futures contracts premium. The metric measures the difference between longer-term futures contracts to the current spot price in regular markets.
Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.
Bitcoin CME 2-month forward contract premium versus Coinbase/USD. Source: TradingView
These fixed-month contracts usually trade at a slight premium, indicating that sellers are requesting more money to withhold settlement for longer. Futures should trade at a 0.5% to 2% annualized premium in healthy markets, a situation known as contango.