bitcoin (BTC) dipped below the $40,000 support on April 18, and the two-week 15% correction was enough to spark $30,000 price predictions in the short term.
Meanwhile, regulatory uncertainties continue to be a key concern for investors, including the European Know Your Customer (KYC) and Anti-Money Laundering (AML) flaws Proposed rules for "non-hosted" private wallets. For example, exchanges started demanding additional information about their users last week, causing some discomfort to traders.
European regulation "near accident" brings anguish
The European Union Parliament's Committee on Economic and Monetary Affairs voted on March 14 to ban or restrict Proof-of-Work-based crypto assets, but the the proposed amendment was postponed.
Most recently, in an email notification to users on April 13, cryptocurrency exchange Bitstamp informed its customers about the continuous policy updates on the platformwith the exchange looking for additional information.
Bitstamp now requires users to provide information such as nationality, place of birth and tax residence, as well as documents proving the origin of the cryptocurrencies and annual income.
On April 14, the non-profit group Coin Center called the Securities and Exchange Commission (SEC) on March 18 Modifications to the Definition of โExchangeโ an โunconstitutional overreachโ. If the proposal becomes an SEC rule, decentralized platforms will likely be urged to register as exchanges.
However, it hasn't all been negative for the sector, as more crypto-friendly names are poised to join the US government.
On April 15, United States President Joe Biden announced his intention to nominate law professor Michael Barr as Vice President of Central Bank Supervision.
Barr was on the Ripple Labs advisory board from 2015 to 2017 before serving as the Treasury Department's undersecretary for financial institutions under former President Barack Obama.
But to get a clearer picture of how traders are positioned, there is no better tool than analyzing Bitcoin derivatives metrics.
Margin traders are becoming more bullish
Margin trading allows investors to borrow cryptocurrencies and leverage their trading position, potentially increasing returns. For example, one can buy cryptocurrencies by borrowing Tether to increase exposure.
On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price falling. Unlike futures contracts, the balance between long and short spreads does not always coincide.
The chart above shows that traders have been borrowing more USD Tether (USDT) recently, as the proportion increased from 13 on April 14 to 17 today. The higher the indicator, the more confident professional traders are with the Bitcoin price.
It is worth noting that the Margin Loan Index 20 reached on April 11 was the highest level in 6 months, indicating optimism.
Bitcoin Options Show Fear Sentiment Prevails
However, it has become difficult to anticipate the next market move since Bitcoin started moving sideways near $40,000 last week. Still, the 25% delta bias is a telltale sign whenever arbitrage desks and market makers overcharge for upside or downside protection.
The 25% delta bias compares similar call and put options. The metric will turn positive when fear prevails because the protective premium on put options is higher than similar risky call options.
If traders fear a Bitcoin price drop, the bias indicator will move above 8%. On the other hand, widespread enthusiasm reflects a negative bias of 8%.
As shown above, we entered the 8% "fear" mode on April 8 after 30 days in a neutral area. Bitcoin had already dipped below $43,000 when the 25% delta bias indicator switched to bearish sentiment.
Despite the negative Bitcoin options indicator, margin trading data suggests that these arbitrage desks and market makers appear confident that the sub-$40,000 drop will reverse.
The OKX margin lending rate showed professional traders increasing their bullish bets after a 15% BTC price rally in 14 days, which should be comforting for those currently underwater.
Regardless, there is no reason to ignore bearish put options that trade at a premium. He notes that the odds of a price crash remain substantial. Consequently, sometimes the best trade is to do nothing, sit back and wait for more clarity in price action.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
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