Bitcoin (BTC) has been stuck in a tight range since August 8, failing to break above $62,000 while consolidating at $58,000. This consolidation reflects growing uncertainty among traders, especially as the BTC futures funding rate remains negative, indicating low demand leverage for buyers.
The question arises as to whether this indicator alone can determine the direction of the cryptocurrency market, or whether past patterns suggest that an uptrend is imminent.
S&P 500 and gold near all-time highs while Bitcoin fails to maintain momentum
The main concern for Bitcoin investors is the positive performance of the S&P 500, which is currently 2.5% below its all-time high and gold is just 1% below its record high. In this context, it is difficult to rationalize Bitcoin being 19.5% below its March 14 high of $73,757. This is regardless of whether cryptocurrencies are considered risk assets or a hedge against potential disruptions in the U.S. debt situation.
Investor sentiment toward Bitcoin has also been dampened by Democratic presidential candidate Kamala Harris’s failure to clarify her stance on the crypto industry beyond vague campaign statements, while Republican candidate Donald Trump has announced plans to fire Gary Gensler as chairman of the U.S. Securities and Exchange Commission (SEC). Industry leaders have been harshly critical of Gensler for the lack of a clear regulatory framework for crypto companies in the United States.
Recent economic data may have contributed to the decline in Bitcoin interest, as it supports the Federal Reserve’s successful efforts to curb inflation without triggering a recession. U.S. retail sales rose 1% in July, beating economists’ expectations of a 0.4% increase. Meanwhile, the Labor Department reported that initial unemployment claims fell by 7,000 from the previous week.
“A soft landing is definitely in place,” Yung-Yu Ma, chief investment officer at BMO Wealth Management US, told Yahoo Finance. Essentially, a stronger macroeconomic environment is boosting stock markets and diminishing Bitcoin’s appeal as a standalone store of value.
From a trading perspective, leverage demand via BTC futures contracts serves as a key indicator of investor confidence. When the market is bullish, bullish investors typically enter leveraged positions, pushing the funding rate of perpetual contracts into positive territory. Rates between 0.2% and 1.2% per month are generally considered neutral market conditions, while rates below this range are considered bearish.
According to the data, the Bitcoin perpetual futures funding ratio was mostly negative on August 14 and 15. In fact, the last time this indicator approached bullish levels was on June 8, when Bitcoin price tested the $72,000 resistance level. This is logical, since perpetual futures are the preferred leverage vehicle for retail traders, while monthly contracts that require rollover often trade at a premium or discount to the spot market.
China’s demand for cryptocurrencies has plummeted, according to stablecoin data.
To determine if the lack of buyer confidence is limited to perpetual futures, we should also examine the demand for stablecoins in the Chinese market. Typically, strong retail demand for cryptocurrencies will cause stablecoins to trade at a premium of 2% or more to the official US dollar rate. Conversely, a discount is usually a sign of fear, and traders are looking to get out of the crypto market.
relevant: Bitcoin Selling Pressure Could Break $56,000 Support as Options Expiry Approaches
On August 15, USD Tether (USDT) was trading at a 0.2% discount in China, indicating a drop in demand for the cryptocurrency. This was a marked change from August 6, when traders were paying a 2% premium for USDT, and the indicator hit its lowest level in three months.
Based on BTC derivatives indicators and Chinese stablecoin demand, Bitcoin faces a difficult path to reclaim $62,000 support. However, historical data shows that retail traders often react rather than anticipate market movements, so a breakout cannot be completely ruled out.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.