Bitcoin price clings to $22K as investors digest latest SEC action and CPI report

After twenty days of support at $22,500, the Bitcoin (BTC) price finally broke down on February 9th. Bullish traders had pinned their hopes on a sustained rally, but this has been replaced by a tight trading area with resistance at $22,000.

The downtrend is even more worrisome as the S&P 500 is trading near its six-month high, but the broader crypto market continues to correct.

Regulatory pressure, mainly in the US, may explain Bitcoin’s recent lackluster performance. First, on January 9, Kraken Exchange reached an agreement with the United States Securities and Exchange Commission (SEC) to stop offering betting services to US clients. The crypto firm also agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.

On February 10, cryptocurrency lending firm Nexo Capital announced that its yield-bearing Earn Interest product for US customers would be shut down in April. Nexo pointed to the $45 million settlement with the SEC and other regulators on Jan. 19 as the reason for the service halt.

US SEC Chairman Gary Gensler issued a warning to crypto companies on January 10 to “come in and follow the law”, explaining that their business models were “conflicted” and claiming that they needed to “unbundle” compound products. Gensler said such companies are required to register with the SEC.

Another blow to crypto market sentiment came on February 13 after Paxos Trust Company announced the termination of its relationship with Binance for the pegged US dollar-pegged stablecoin BUSD amid an ongoing investigation by New York state regulators.

On February 14, the US will report January’s consumer price index data, which will reveal whether price increases have been moderated following the central bank’s interest rate hikes. Generally, lower inflation rates will be celebrated as it reduces pressure on the US Federal Reserve (FED) to slow the economy. But on the other hand, lower consumer demand is likely to squeeze corporate earnings, which could further trigger the recessionary environment.

Let’s look at Bitcoin derivatives calculations to better understand how professional traders are positioned in the current market conditions.

Asian stablecoin demand is weakening, but there are signs of resilience

An excellent way to measure overall cryptocurrency demand in Asia is the USD Coin (USDC) premium, which is the difference between China-based peer-to-peer trades and the US dollar.

Excessive buying demand tends to push the indicator above fair value of 104%, and during bearish markets the stablecoin’s market supply is flooded, causing a discount of 4% or higher.

Currently, the USDC premium is 2%, down from 3% on February 6, indicating declining demand for stablecoin purchases in Asia. However, the indicator remains positive, indicating moderate buying activity from retail traders despite the 6% Bitcoin price decline during the period.

Nevertheless, one should monitor the BTC futures markets to understand how professional traders are positioned.

Futures premium left the neutral-to-bullish range

Retail traders usually avoid quarterly futures because of their price difference from the spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuations in funding rates in a perpetual futures contract.

The annual premium for three-month futures should trade between +4% and +8% in healthy markets to cover costs and associated risks. Therefore, when futures trade below this range, it shows a lack of confidence from leverage buyers. This is usually a bearish indicator.

The chart shows declining momentum as the Bitcoin futures premium broke below the 4% neutral threshold on February 8. This move represents a return to a neutral-to-bearish sentiment that prevailed until mid-January.

Related: Coinbase CEO invites DC residents over for ice cream and crypto chat

Crypto traders expect further pressure from regulators

While Bitcoin’s 9% drop since the failed $24,000 resistance test on February 2 seems discouraging, the overwhelmingly negative regulatory news flow has professional traders turning risk-averse.

At the same time, the traditional market is looking for additional data before adding bullish positions. For example, investors would rather wait until the US FED shows conviction at the end of interest rate hikes.

At the moment, the odds favor bears as regulatory uncertainty provides a favorable environment for fear, uncertainty and doubt – although the news is unrelated to Bitcoin and focused on crypto exchanges and stablecoins.

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.

This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making a decision.