$16,000 again tests most likely path for Bitcoin, according to 2 derived metrics

Bitcoin (BTC) fell below $16,800 on December 16, hitting its lowest level in more than two weeks. More importantly, the move was a complete reversal of the momentary excitement that led to the high of $18,370 on December 14th.

Curiously, Bitcoin fell 3.8% in seven days, compared to the 3.5% decline of the S&P 500 index over the same period. So, on the one hand, Bitcoin bulls take comfort in knowing that correlation has played a key role; at the same time, however, he got $206 million worth of BTC futures contracts liquidated on Dec. 15.

Some embarrassing economic data from the auto loan sector has left investors uneasy as the default rate among the lowest income consumers is now above 2019 levels. Concerns emerged after the average monthly payment for a new car reached $718, a 26% increase in three years.

Additionally, alongside the Bank of England, two central banks raised interest rates by 50 basis points to multi-year highs, underscoring that borrowing costs are likely to continue to rise longer than the market does. had hoped.

Uncertainty in the cryptocurrency markets has resurfaced after two of the most prominent auditors suddenly dropped their services, leaving the exchanges on hold. For example, the website of the French audit firm Mazars Group is offline. The company previously worked with several exchanges, including Binance, KuCoin, and Crypto.com.

Meanwhile, accounting firm Armanino has also reportedly terminated its crypto auditing services. The auditor has worked with several crypto trading platforms like OKX, Gate.io and the struggling FTX exchange. Curiously, Armanino was the first accounting firm to establish relationships in the crypto industry, dating back to 2014.

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

Asia-based stablecoin premium drops to 2-month low

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 100% 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 101.8%, down from 99% on Dec. 12, indicating increased demand for stablecoin purchases from Asian investors. The data has gained relevance after the sharp 9.7% correction in five days since the peak of $18,370 on December 14.

However, this indicator should not necessarily be viewed as bullish, as the stablecoin could have been acquired to protect against cryptocurrency downside risks, which means investors are becoming more bearish.

Leverage buyers slowly tossed in the towel

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

As Bitcoin broke below the $16,800 support, professional traders reduced their leveraged long positions according to the long to short indicator.

For example, the Binance Trader Ratio has slightly decreased from 1.11 on December 14 to the current level of 1.04. Meanwhile, Huobi showed a slight decrease in its long/short ratio, with the indicator falling from 1.01 to 0.05 over the same period.

Finally, on the OKX exchange, the metric fell from 1.00 on December 14 to the current ratio of 0.98. So, on average, traders have decreased their long leverage ratio over the past five days, indicating less confidence in the market.

A potential new $16,000 test is likely in the works

The moderate stable premium of 101.8% in Asia, coupled with news of a declining long-to-short indicator from leading traders, tells a story of buyers gradually giving in to pessimism.

Additionally, the $206 million liquidation of BTC long futures indicates that buyers are continuing to use excessive leverage, creating the perfect storm for another stage of correction.

For now, the price of Bitcoin continues to be heavily dependent on traditional stock markets. Still, weak macro data and the uncertainty brought by crypto audit firms point to a higher probability of a Bitcoin retest of $16,000.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.