After a failed rally above $31,000 on June 23, Bitcoin (BTC) has maintained the $30,300 resistance for the past three days. Curiously, this happened as gold hit a three-month low, trading at $1,910 on June 22, down from a $2,050 peak in early May.
Investors are now questioning how solid Bitcoin’s $30,000 support is. So analyzing what caused the recent price rally is crucial to understanding how traders are positioned in the BTC margin and futures markets.
Why did BTC price break above $30,000?
Some analysts attribute Bitcoin’s recent 21.5% gains in 11 days to BlackRock̵[ads1]7;s spot Bitcoin Exchange-traded Fund (ETF). But other events may have fueled the cryptocurrency gains. For example, on June 26, HSBC Bank in Hong Kong reportedly introduced its first local cryptocurrency services using three listed crypto ETFs.
Also, the ProShares Bitcoin Strategy ETF, a Bitcoin futures fund, saw its biggest weekly inflow in a year at $65 million, with assets exceeding $1 billion. It was the first BTC-linked ETF in the US and is one of the most popular among institutional investors.
But, more importantly, the US crypto regulatory environment may be improving after a period marked by enforcement actions by the Securities and Exchange Commission (SEC) targeting exchanges that allegedly act as unregistered securities brokers.
Related: How security, education and regulation can curb growing crypto fraud
On June 25, Federal Reserve Governor Michelle Bowman said financial institutions had been left in a “regulatory void” when it came to new technologies, including digital assets. Bowman added that policymakers have been relying on “general but non-binding statements,” which leave significant uncertainty and impose new business requirements after significant investments have been made.
In that sense, a draft bill in the US House of Representatives aims to prohibit the SEC from refusing to register digital asset trading platforms as a regulated alternative trading system. Published on June 2, the proposed legislation would allow such firms to offer “digital goods and stable-payment coins.”
Bitcoin margin, futures suggest bullishness
Let’s now look at Bitcoin derivatives calculations to better understand how professional traders are positioned amid improved regulatory perspectives and a significant institutional influx.
Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.
OKX, for example, provides a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of a cryptocurrency’s price.
The chart above shows that OKX traders’ margin lending ratio bottomed out at 17 on June 20, but has improved over the past four days. The move indicates a proliferation of margin longs as the current 24x ratio favors bullish stablecoin lending.
Still, investors should analyze the Bitcoin futures long-to-short measure, which excludes externalities that may have solely affected the margin markets.
There are occasional methodological discrepancies between exchanges, so readers should monitor changes rather than absolute numbers.
Top traders on Huobi significantly increased their longs between June 22 and June 24 when the Bitcoin price broke above the $30,000 resistance.
On the other hand, OXK’s top traders first increased their shorts on June 22 and June 23, but then reversed their positions by adding bullish bets.
Finally, top traders at Binance started adding longs on June 21st and have continued to increase bullish positions until June 23rd.
Bitcoin’s $30,000 support shows strength
Overall, Bitcoin bulls have added leveraged long positions using margin and futures markets supported by the positive momentum from more spot Bitcoin ETF requests, heavy institutional inflows and a more rational approach from US lawmakers.
The SEC’s regulation-by-enforcement approach is not supported by any US central bank governors and has faced some serious pushback in the US House of Representatives. For example, Representative Warren Davidson has introduced the SEC Stabilization Act, citing “ongoing abuses of power” and calling for the removal of Gary Gensler as chairman of the SEC.
Given the favorable scenario against cryptocurrencies, Bitcoin bulls should now have the upper hand to maintain the $30,000 BTC price support level in the coming weeks.
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.