The stream of negative regulatory news concerning Bitcoin [BTC] along with other crypto-assets has been nonstop over the past few weeks.
Today’s FUD — fear, uncertainty, and doubt — news that did not cite any actions and merely refreshes old data from China. An official press release from the Chinese government outlined plans to “crackdown on Bitcoin mining and trading behavior.”
While retail traders are easily scared by this sort of story, whales and market makers skills to identify a buying opportunity, which was the case for today’s drop to $36,200 USD.
China Bitcoin Ban
The Chinese Financial Stability and Development Committee minutes presented general guidelines on several issues, along with reforming mid-sized financial institutions and cracking down on illicit securities activities. Therefore, it had been neither a targeted attack on Bitcoin nor did it differ from the actions and discourse from previous years.
Earlier on 18th May, trade associations under the PBoC warned financial institutions and other member organizations to not involve in any crypto-related businesses.
However, crypto trading in China has been banned since September 2017, and concerns regarding the carbon emissions of Bitcoin mining operations were expressed over the past 3-weeks ago by the Chinese state media outlet PengPai.
Even market-making platforms are targeted by Chinese authorities since 2018. Some crypto trading sites continued to work illegally within the country, but most were identified and pack up by authorities in 2019.
Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bull or bear.
Whales and market makers on OKEx reached a 1.08 long-to-short ratio within the early hours of 21st May, favoring longs by 8%. It’s worth noting that this level was rock bottom in 30 days, indicating a scarcity of conviction. However, these pro traders entered bullish positions over the day as Bitcoin retraced under $37k, favoring longs by 62%.
Bear Markets & Volume Spikes
Trading volume is the best indicator to verify whale activity, and people peaks got to coincide with price bottoms. As every trade features a buyer and a seller, extreme volatility can occur on low trading volumes, therefore not necessarily involving pro traders.
By watching the above data, there should be little question that whales and market makers aggressively bought the $36,200 USD dip on 21st May. Spot exchange volumes surpassed $5.6 Bln in four hours, which is extreme even for a 12% price movement.
To put things in perspective, the daily average volume over the past month stands at $11 Bln. Therefore, by combining this data with derivatives exchanges’ long-to-short ratio, one should assume that some heavy players were brave enough to purchase today’s dip.
Although nobody can precisely forecast whether $35,200 USD will hold over the weekend, one should expect those heavy hands to take care of their position for a real while.