Bitcoin price struggles to hold above $30K amid regulatory uncertainty

Market Analysis

Bitcoin (BTC) price reclaimed the $30,000 support on April 18 after briefly testing $29,130 on the previous day. However, traders question whether the recovery is sustainable given the increased regulatory scrutiny, especially in the United States. 

Bitcoin price in USD, 4-hour. Source: TradingView

Rostin Behnam, the Chairman of the Commodity Futures Trading Commission (CFTC), said on April 14 that Binance intentionally broke U.S. rules concerning futures and commodities trading. For example, knowingly allowing U.S. citizens to participate on the exchange through the use of obfuscation tools. The comments stem from the CFTC’s March 27 lawsuit against Binance and its CEO Changpeng “CZ” Zhao for alleged trading violations.

Also on April 14, in an open meeting with U.S. Securities and Exchange commissioners and staff, SEC Chair Gary Gensler said the agency will be revisiting the proposed redefinition of an “exchange”. The SEC intends to bring certain brokers under additional regulatory scrutiny, and explicitly include decentralized applications.

On April 17, the U.S. Securities and Exchange Commission (SEC) charged crypto asset trading platform Bittrex and former CEO William Shihara for operating an unregistered securities exchange, broker, and clearing agency. Separately, Bittrex Global is being charged for operating a shared order book with Bittrex.

Bittrex had already announced its intention of closing down U.S. operations on April 30 after reportedly receiving a Wells Notice in March warning about the impending regulatory action.

Other countries are taking different approaches

The regulatory environment in Hong Kong seems to have improved after China’s state-affiliated banks began to onboard crypto companies. In addition to the Bank of Communications, ZA Bank — Hong Kong’s largest virtual bank controlled by a Chinese internet insurer — will also act as the settlement bank for some crypto companies.

According to a Wall Street Journal report, these banks will serve as settlement banks to enable token deposits at authorized exchanges to be withdrawn in Hong Kong dollars, Chinese yuan and U.S. dollars.

The securities regulator of Argentina also approved a Bitcoin-based futures index on April 12. The regulated derivatives contract will offer qualified investors a safe and regulated way to gain BTC exposure. All trades will be settled in the national fiat currency, with traders required to deposit Argentine pesos through bank transfer.

To understand how professional traders are positioned, traders should analyze the options markets.

Options traders are leaning toward bearish structures

Traders can gauge the market’s sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A put-to-call ratio of 0.70 indicates that put option open interest lags behind the greater number of call options. In contrast, a 1.40 indicator favors put options, which is a bearish sign.

BTC options volume put-to-call ratio. Source: Laevitas

Since April 5, Bitcoin’s put-to-call ratio has been either balanced or favoring protective put options. The current 0.60 indicator slightly shows higher demand for neutral-to-bearish option strategies, although there is nothing out of the ordinary.

To confirm whether traders effectively became bearish, one should also analyze the Bitcoin futures markets.

Bitcoin futures metrics remain neutral-to-bearish

Bitcoin quarterly futures are popular among whales and arbitrage desks. These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period of time.

As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Related: Bitcoin ‘mega whales’ send BTC price to $30K as volatility hits crypto

Bitcoin 3-month futures annualized premium. Source: Laevitas.ch

The chart shows traders have been neutral-to-bearish for the past two weeks as the basis indicator oscillated between 2.4% and 4.3%. This data should not come as a surprise given that Bitcoin price remains 56% below its $69,000 all-time high.

Bitcoin’s margin and futures markets reflect a neutral to bearish sentiment, but nothing exaggerated. The reduction in demand from bullish strategies is likely reflecting the 50% Bitcoin price gains since March 11.

However, investors fear regulatory action could dim the demand for retail and institutional clients, so unless there’s more clarity on that front, the odds of Bitcoin breaking above $31,000 remain slim.

The views, thoughts and opinions expressed here are the authors’ alone 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 conduct their own research when making a decision.

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