Bitcoin Struggles to Hold $29,000 as Regulation Fears and Terra’s UST Implosion Hit the Cryptocurrency Hard

Bitcoin (BTC) price initially rebounded from its recent low of $29,000, but the general market sentiment after a 25% price drop in five days remains largely negative. Currently, the Crypto “Fear and Greed index”, which uses volatility, volume, social metrics, Bitcoin dominance and Google trends data, has plummeted to its lowest level since March 2020 and, At the moment, there seems to be little to protect the market against further decline.

Crypto “Fear and Greed index” (index of fear and greed). Source:

Regulation continues to weigh on markets

Regulation remains the main threat to markets and it is clear that investors are taking a risk approach to high volatility assets. Earlier this week, during a Senate Banking Committee hearing, United States Treasury Secretary Janet Yellen called for a regulatory framework for stablecoins, specifically referring to stablecoin TerraUSD (UST) falling below of USD 0.70.

Separately, the United Kingdom introduced two bills on May 10 aimed at addressing the regulation of cryptocurrencies. The Financial Services and Markets Bill and the Economic Crimes and Corporate Transparency Bill aim to strengthen the country’s financial services industry, including supporting “the safe adoption of cryptocurrencies.”

Meanwhile, Google searches for “Bitcoin” and “cryptocurrencies” are nearing their lowest levels in 17 months.

Global search for “Bitcoin” and “cryptocurrencies”. Source: Google Trends

This indicator could partly explain why Bitcoin is 56% below its all-time high of $69,000 as public interest is low, but let’s take a look at how professional traders position themselves in the derivatives markets.

Long to short data confirms lack of buyer demand

The Net Long-Short Ratio of Top Traders analyzes positions in cash, perpetual and futures contracts. From an analysis point of view, it allows you to better understand whether professional traders are bullish or bearish.

There are occasional methodological discrepancies between exchanges, so viewers should keep an eye on changes rather than absolute figures.

Bitcoin long to short ratio of professional traders. Source: Coinglass

According to the long-to-short indicator, Bitcoin may have risen 4% from the low of $29,000 on May 11, but professional traders have not increased their bullish bets. For example, the ratio of the top OKX traders decreased from 1.20 to the current level of 1.00.

On the other hand, data from Binance shows those traders holding steady near 1.10, and a similar trend occurred on Huobi, as the ratio of top traders between longs and shorts stood at 0.97. The data shows that there is no demand for leverage purchases among professional investors despite the 5% price rally.

CME futures traders are no longer bearish

To further demonstrate that the cryptocurrency market structure has deteriorated, traders should look at the CME Bitcoin futures contract premium. The metric compares long-term futures contracts and the traditional spot market price.

These fixed-calendar contracts typically trade at a slight premium, indicating sellers are asking for more money to hold the settlement for longer. Consequently, 1-month futures should trade at a premium of between 0.5% and 1% in healthy markets, a situation known as contango.

When that indicator fades or turns negative (backwardation), it is an alarming red flag because it indicates bearish sentiment is present.

CME BTC 1 month forward contract vs. BTC/USD on FTX. Source: TradingView

The chart above shows how the indicator entered backwardation on May 10 and the move marks the lowest reading in two months with a negative 0.4% premium.

The data shows that institutional traders are below the “neutral” threshold measured by futures basis and this points to the formation of a bear market structure.

Additionally, data from major long-to-short traders shows a lack of appetite despite the rapid 4% price recovery from the $29,000 level and the fact that BTC price is now trading near the same level. is also worrying. Unless derivatives metrics show some improvement, the odds of a further price correction remain high.

The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Every investment and trading move involves risk, you should do your own research when making a decision.

Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.

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