Bitcoin (bitcoin) prices initially rebounded from recent lows of $29,000, but overall market sentiment remains largely negative after a five-day price drop of 25%. Currently, the cryptocurrency “Fear and Greed Index” use Volatility, trading volume, social metrics, Bitcoin dominance and Google Trends data have fallen to their lowest levels since March 2020, and there seems to be little to protect the market from further downside at the moment.
Regulation continues to weigh on the market
Regulation remains the main threat weighing on the market, and it is clear that investors are taking a safe-haven approach to highly volatile assets.Earlier this week, at a hearing of the U.S. Senate Banking Committee Treasury Secretary Janet Yellen Call for a stablecoin regulatory framework, specifically targeting the TerraUSD (UST) stablecoin Below $0.70.
In addition, the UK has introduced Two bills to address cryptocurrency regulation May 10th. The Financial Services and Markets Act and the Economic Crimes and Corporate Transparency Act aim to strengthen the country’s financial services industry, including supporting the “safe adoption of cryptocurrencies.”
Meanwhile, Google searches for “bitcoin” and “crypto” are near their lowest levels in 17 months.
This metric could partially 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 where professional traders are positioned in the derivatives market.
Long and short data confirms lack of buyer demand
Top traders’ net long-to-short ratio analyzes positions in spot, perpetual, and futures contracts. From an analytical standpoint, it provides a better understanding of whether professional traders are bullish or bearish.
There are occasional differences in methodology between different exchanges, so viewers should focus on changes rather than absolute numbers.
Bitcoin may have gained 4% since its May 11 low of $29,000, according to bullish and bearish indicators, but professional traders are not adding to their bullish bets. For example, OKX’s top traders ratio fell from 1.20 to its current level of 1.00.
Additionally, Binance data shows that these traders stabilized around 1.10, and Huobi has seen a similar trend, with top traders having a long-short ratio of 0.97. Despite the 5% recovery in prices, there is no demand from professional investors for leveraged purchases, the data shows.
CME futures traders are no longer bearish
For further evidence that the crypto market structure has deteriorated, traders should analyze the CME’s premium on Bitcoin futures contracts. The indicator compares long-term futures contracts and traditional spot market prices.
These fixed-calendar contracts typically trade at a slight premium, suggesting sellers are asking for more money to extend settlement time. Therefore, in a healthy market, one-month futures should trade at a premium of 0.5% to 1%, a condition known as contango.
Whenever the indicator fades or turns negative (receding), it is a worrying red flag as it signals bearish sentiment.
The chart above shows how the indicator entered backwardation on May 10, a move that marked the lowest reading in two months and a negative premium of 0.4%.
The data showed institutional traders were below the “neutral” threshold measured by the futures basis, suggesting a bearish market structure was developing.
Furthermore, despite a quick 4% price recovery from the $29,000 level and BTC prices now nearing the same level, long-short data from top traders shows a lack of interest. Unless derivatives indicators show some improvement, the likelihood of further price correction remains high.
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