Bitcoin (BTC) rose 8.4% between May 15 and 16, peaking at $66,750, a three-week high. Although Bitcoin has stabilized near $65,000, this price change represents a turnaround after Bitcoin retested $57,000 support on May 1. However, these gains were not enough to generate an advantage for Bitcoin derivatives metrics.
What is the reason for Bitcoin’s poor performance?
Part of the disappointment among Bitcoin investors can be attributed to the strong performance of traditional assets. The S&P 500 reached an all-time high on May 16, with a 15-day total gain of 6%. Meanwhile, gold is up 4% over the same period and is currently trading at $2,375, less than 1% of its all-time high closing price.
Bitcoin needs to rise another 12% to regain its all-time high closing price of $73,084. This feat seems unlikely given that the main driver of the price, inflows into spot Bitcoin exchange-traded funds (ETFs), has faded. These ETFs have captured $12.1 billion in investments since their launch in January, but have remained stagnant over the past two months.
The deteriorating regulatory environment, particularly in the United States, may explain why investors are hesitant to purchase Bitcoin using derivatives despite recent price strength. On May 6, Rustin Behnam, Chairman of the United States Commodity Futures Trading Commission (CFTC), warned that more enforcement action would be taken against the cryptocurrency ecosystem over the next six to two years.
Additionally, U.S. regulators have several pending lawsuits against cryptocurrency companies, including Binance, Coinbase, and Kraken. Recent enforcement actions against privacy-focused services and brokers like Robinhood have also contributed to increased uncertainty. The lack of a clear legislative framework and judicial clarity limits the appetite of Bitcoin investors.
Additionally, cryptocurrencies received negative media attention after the arrest of 193 suspects for money laundering using stablecoins in China. Authorities claimed on May 15 that these individuals transferred $1.9 billion using stablecoins to smuggle items and investments overseas. Additionally, on May 1, two US senators called for an investigation into the use of cryptocurrencies to finance terrorist organizations in the Middle East.
Bitcoin derivatives stable despite rise above $66,000
To understand whether whale sentiment has been affected by the deteriorating regulatory environment, it is worth analyzing data from Bitcoin futures markets. The long/short ratio of top traders consolidates their positions in spot, perpetual and quarterly futures contracts, providing a comprehensive view of how bullish or bearish these traders are.
On OKX, the current buy/sell ratio is 0.96, indicating that bulls and bears have roughly equal positions. However, this is a less optimistic position compared to May 14, when the index reached 1.25, favoring long trades. Likewise, senior traders on Binance are now less optimistic than on May 14, with the buy/sell ratio dropping from 1.31 to 1.14.
about: Bitcoin Whale Demand Accelerates, But Price Rise Could “Take Weeks” – Analysts
To gauge the appetite of retail traders, one should focus on perpetual futures, also known as inverse swaps. These contracts include a built-in rate that is recalculated every eight hours to compensate for imbalances in leverage demand. Essentially, a negative rate indicates a preference for the leverage used by the seller(s).
Notice how Bitcoin’s funding rate has remained below 0.01% over the past month, indicating balanced demand between long and short trades. By derivatives metrics, even the recent surge above $66,000 failed to inspire confidence among retail traders.
Essentially, investors aren’t confident they can place bullish bets while regulatory uncertainty persists. On the plus side, if Bitcoin ends up rising above $68,000, most traders will be surprised, which could fuel the rally as there is room for upside leverage.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.
