Bitcoin’s price has recently seen a surge, but traders are concerned about its sustainability due to increased regulatory scrutiny, particularly in the United States. While Bitcoin briefly tested $29,130 on April 17, it reclaimed the $30,000 support the next day. However, regulatory risks continue to loom, and traders remain wary. Amid this uncertainty, professional traders analyze options and futures markets to gauge market sentiment.
Regulatory Scrutiny Intensifies in the US
The Commodity Futures Trading Commission (CFTC) chairman, Rostin Behnam, accused Binance of violating US rules on futures and commodities trading by knowingly allowing US citizens to trade on the exchange using obfuscation tools. Behnam’s comments stem from the CFTC’s lawsuit against Binance and its CEO, Changpeng Zhao, for alleged trading violations. The SEC chair, Gary Gensler, has also stated that the agency will revisit the proposed redefinition of an “exchange” and bring certain brokers under additional regulatory scrutiny, including decentralized applications. Furthermore, the SEC charged Bittrex, a crypto asset trading platform, and former CEO William Shihara with allegedly operating an unregistered securities exchange, broker, and clearing agency.
Different Approaches to Regulation Taken by Other Countries
While the regulatory environment in the US appears to be growing increasingly stringent, other countries are taking a different approach. Hong Kong’s regulatory environment, for example, appears to have improved after state-affiliated banks began to onboard crypto companies, such as ZA Bank, the largest virtual bank in Hong Kong. Meanwhile, Argentina’s securities regulator approved a Bitcoin-based futures index that will offer qualified investors a safe and regulated way to gain BTC exposure.
Options Markets Indicate Neutral-to-Bearish Sentiment
Traders can analyze the options market to understand how professional traders are positioned. They can measure whether more activity is going through call (buy) options or put (sell) options, which is indicative of bullish or bearish strategies, respectively. Bitcoin’s put-to-call ratio since April 5 has been either balanced or favoring protective put options, indicating neutral-to-bearish sentiment.
Bitcoin Futures Markets Are Neutral-to-Bearish
Traders should also analyze Bitcoin futures markets to confirm whether traders have become bearish. Bitcoin quarterly futures typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period of time. As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium. However, the basis indicator has oscillated between 2.4% and 4.3% for the past two weeks, reflecting a neutral-to-bearish sentiment among traders.
Bitcoin’s price has recovered but remains uncertain, as traders continue to be wary of regulatory risks, particularly in the United States. While other countries are taking a different approach to regulation, the US appears to be tightening its regulatory environment. Traders can analyze options and futures markets to gauge market sentiment, which is currently neutral-to-bearish. Until there is more regulatory clarity, the odds of Bitcoin breaking above $31,000 remain slim. This article does not contain investment advice or recommendations.