Bitcoin (BTC) is decoupling from conventional markets, but not in a favorable manner, this week as the stock markets started to flash a little of green. Bitcoin is down 3%, while the Nasdaq Composite tech-heavy index is up 3.1 percent.
Cryptocurrency traders are concerned about deteriorating global macroeconomic circumstances, which might increase investors’ resistance to risky assets, according to May 27 statistics from the US Commerce Department.
There is a $160 billion exchange-traded fund called Invesco QQQ Trust, which has lost 23% of its value this year. It has also dropped 20% in 2022 for iShares MSCI China ETF, a $6.1 billion tracker of Chinese equities.
Traders should examine Bitcoin derivatives data in order to gain a better understanding of how crypto traders are positioned. Investors may borrow bitcoin via margin trading, allowing them to boost the possible return on their investment. To increase one’s exposure, one might, for example, purchase cryptocurrencies using borrowed Tether (USDT).
Unlike futures contracts, where margin longs and shorts are always equal, Bitcoin borrowers may only short the cryptocurrency if they bet on its price falling.
The data above illustrates that traders have lately borrowed more USD Tether, as the ratio has climbed from 13 on May 25 to the current 20. Professional traders are more confidence in Bitcoin’s price when the indicator is higher.
A sign of positive optimism was shown on May 18 when the margin lending ratio jumped to 29 percent, the highest in over six months. It’s always a bad warning if the USDT/BTC margin lending ratio falls below 5.
Terra USD (UST) demise on May 10 may have been a factor in the BTC margin trading and option price divergence. Stablecoin traders and arbitrage desks may have suffered significant losses as a result of the loss of the peg, which has reduced their appetite for risk in BTC option trading since then.
Furthermore, according to Loanscan.io, the annual interest rate for USD Tether loans on Aave and Compound has reduced to 3%. As a result, the USDT/BTC margin lending ratio will rise as traders take advantage of the low-cost leverage technique.
The present adverse trend in Bitcoin cannot be predicted, thus the availability of low-cost financing does not ensure a good price movement.