Stablecoin data points to bulls’ “healthy appetite” and a possible Bitcoin rally to $25,000

Bitcoin (BTC) rallied 11% to $23,000 from January 20 to 21, defying bear expectations of a pullback to $20,000. More notably, the move brought demand from Asia-based retail investors, according to data from a major stablecoin premium indicator.

Traders should note that the tech-heavy Nasdaq 100 index also gained 5.1% between January 20 and 23, boosted by investors’ hopes that China will reopen for business after its COVID-19 lockdowns and weaker-than-expected economic data from China. USA and Eurozone.

Another bullish note came on January 20 after US Federal Reserve Governor Christopher Waller bolstered market expectations for a 25 basis point rate hike in February. Several heavyweights are expected to report their latest quarterly earnings this week to complete the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.

In essence, the central bank is aiming for a “near recession,” or a controlled decline in the economy, with fewer jobs and less inflation. However, if companies are struggling with their balance sheets due to the rising cost of capital, earnings will suffer and the resulting layoffs will be much higher than expected.

On January 23, blockchain analytics firm Glassnode pointed out that long-term Bitcoin investors have been holding losing positions for more than a year, making them more resilient to future negative price movements.

Let’s look at the dimensions of derivatives to better understand how professional traders position themselves in current market conditions.

Asia-based stablecoin premium is close to FOMO territory

The USD Coin (USDC) premium is a good measure of China-based cryptocurrency retail trader demand. It measures the difference between China-based peer-to-peer trading and US dollars.

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

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

Currently, the USDC premium is 103.5%, up from 98.7% on January 19, indicating a higher demand for stablecoin purchases from Asian investors. The move coincided with Bitcoin’s 11% daily gain on January 20 and indicates mild FOMO by retail traders as the BTC price nears $23,000.

Pro traders are not particularly excited after the recent profit

The long-short metric only excludes external influences that may affect the stablecoin market. It also collects data from exchange clients’ positions in spot, standing and quarterly futures contracts, thus providing better insight into how professional traders are positioned.

There are occasional methodological discrepancies between the various exchanges, so readers should definitely follow the changes instead of the numbers.

The best traders of exchanges Bitcoin long-short ratio. Source: Coinglass

The first trend you can see is that the top traders on Huobi and Binance are extremely skeptical of the recent rally. These whales and market makers have not changed their long-short levels over the past week, meaning they are unsure of buying above $20,500, but are unwilling to open short (bearish) positions.

Interestingly, top traders on the OKX reduced their net longs (bull) until January 20, but reversed their positions sharply during the final phase of the bull run. Looking at the longer 3-week time frame, their current long-short ratio of 1.05 remains below the 1.18 seen on January 7th.

Related: The worst days of Bitcoin miners may be over, but several major obstacles remain

Bears are shy, a great opportunity for bull runs

A 3.5% stablecoin premium in Asia suggests that retail traders’ appetite is higher. In addition, the long-short indicator of top traders shows that despite Bitcoin reaching its highest level since August, demand for shorts is not increasing.

Additionally, the $335 million liquidation in short-dated (bearish) BTC futures contracts from January 19 to 20 signals that sellers are continuing to use excessive leverage, creating the perfect storm for another leg of the bull run.

Unfortunately, the price of Bitcoin continues to be highly dependent on the performance of exchanges. Given how resilient BTC has been amid uncertainties surrounding the bankruptcy of Digital Currency Group’s Genesis Capital, the odds are in favor of a rally towards $24,000 or $25,000.