Stablecoin data points to ‘healthy appetite’ from bulls and possible Bitcoin rally to $25,000

Bitcoin (BTC) rose 11% between Jan. 20 and Jan. 21, hitting the $23,000 level and shattering bear expectations for a pullback to $20,000. What’s even more notable is that the move sparked demand from Asia-based retail investors, according to data from a key stablecoin premium indicator.

Traders should note that the tech-heavy Nasdaq 100 index also gained 5.1% between Jan. 20 and Jan. 23, fueled by investors’ hopes of China reopening after its COVID-19 lockdowns and weaker than expected economic data in the United States and the Eurozone.

More bullish news came on Jan. 20 after US Federal Reserve Governor Christopher Waller reinforced market expectations of a 25 basis point interest rate hike in February. A handful of heavyweight companies are expected to release their latest quarterly results this week to complete the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.

Essentially, the central bank is aiming for a “close landing,” or a controlled decline in the economy, with less job creation and less inflation. However, if companies are struggling with their balance sheets due to the rising cost of capital, profits tend to fall and ultimately layoffs will be much higher than expected.

On January 23, on-chain analytics firm Glassnode pointed out that long-term Bitcoin investors have been holding losing positions for more than a year, so they are likely more resilient to future adverse price movements.

Let’s look at derivatives metrics to better understand how professional traders are positioning themselves under current market conditions.

Asia-Based Stablecoin Premium Approaches FOMO Zone

The USD Coin (USDC) premium is a good indicator of demand from China-based crypto retail traders. It measures the difference between peer-to-peer transactions based in China and the US dollar.

Excessive buying demand tends to pressure the indicator above the 103% fair value, and during bear markets, the stablecoin’s market supply is flooded, leading to a discount of 4% or more. .

USDC peer-to-peer against USD/CNY. Source: OKX

Currently, the USDC premium stands at 103.5%, down from 98.7% on Jan. 19, signaling increased demand for stablecoin purchases from Asian investors. The move coincided with Bitcoin’s 11% daily gain on January 20 and indicates moderate FOMO by retail traders as the price of BTC approached $23,000.

Professional traders are not particularly excited after the recent gain

The long-to-short metric excludes externalities that could have impacted the stablecoin market alone. It also aggregates data from trading client positions across spot, perpetual and quarterly futures, providing better positioning insights for professional traders.

There are sometimes methodological discrepancies between different exchanges, so readers should monitor changes rather than absolute numbers.

Top traders of bitcoin exchanges long-short ratio. Source: Coinglass

The first trend that can be spotted is that top traders from Huobi and Binance are extremely skeptical of the recent rally. These whales and market makers haven’t changed their long to short levels over the past week, meaning they’re not confident buying above $20,500, but they’re not willing open short (bearish) positions.

Interestingly, OKX’s top traders reduced their net (bullish) longs until January 20, but drastically changed their positions during the latter phase of the bull run. Over a longer 3-week period, their current long/short ratio of 1.05 remains below the 1.18 seen on January 7th.

Related: Bitcoin Miners’ Worst Days May Be Over, But Some Key Hurdles Remain

The bears are shy, providing an excellent opportunity for bullfights

The flat 3.5% premium in Asia indicates higher appetite from retail traders. Moreover, the long-short indicator of top traders shows no increase in demand for shorts, even though Bitcoin has reached its highest level since August.

Additionally, the liquidation of $335 million in short (bearish) BTC futures contracts between Jan. 19 and Jan. 20 indicates that sellers continue to use excessive leverage, creating the perfect storm for another leg up. bull run.

Unfortunately, the price of Bitcoin continues to be heavily dependent on the performance of stock markets. Given BTC’s resilience during the uncertainties surrounding Digital Currency Group’s Genesis Capital bankruptcy, the odds are in favor of a rally towards $24,000 or $25,000.