Bitcoin (BTC) broke beneath $16,800 on Dec. 16, reaching its lowest stage in additional than two weeks. Extra importantly, the motion was a whole turnaround from the momentary pleasure that had led to the $18,370 peak on Dec. 14.

Curiously, Bitcoin dropped 3.8% in seven days, in comparison with the S&P 500 Index’s 3.5% decline in the identical interval. So from one facet, Bitcoin bulls have some consolation in figuring out that correlation performed a key function; on the identical time, nevertheless, it obtained $206 million of BTC futures contracts liquidated on Dec. 15.

Some troublesome financial information from the auto mortgage business has made traders uncomfortable as the speed of defaults from the lowest-income customers now exceeds 2019 ranges. Issues emerged after the typical month-to-month cost for a brand new automobile reached $718, a 26% enhance in three years.

Moreover, alongside the Financial institution of England, two central banks elevated rates of interest by 50 foundation factors to multiyear peaks — highlighting that borrowing prices would probably proceed rising for longer than the market had hoped.

Uncertainty in cryptocurrency markets reemerged after two of essentially the most distinguished auditors out of the blue dropped their providers, leaving exchanges hanging. As an illustration, the web site of the French auditing agency Mazars Group is offline. The agency beforehand labored with a number of exchanges, together with Binance, KuCoin and Crypto.com.

In the meantime, accounting agency Armanino has additionally reportedly ended its crypto auditing providers. The auditor labored with a number of crypto buying and selling platforms like OKX, Gate.io and the troubled FTX alternate. Curiously, Armanino was the primary accounting agency to ascertain relationships within the crypto business, courting again to 2014.

Let’s take a look at derivatives metrics to raised perceive how skilled merchants are positioned within the present market situations.

The Asia-based stablecoin premium drops to 2-month low

The USD Coin (USDC) premium is an effective gauge of China-based crypto retail dealer demand. It measures the distinction between China-based peer-to-peer trades and the US greenback.

Extreme shopping for demand tends to stress the indicator above honest worth at 100%, and through bearish markets, the stablecoin’s market provide is flooded, inflicting a 4% or larger low cost.

At the moment, the USDC premium stands at 101.8%, up from 99% on Dec. 12, indicating larger demand for stablecoin shopping for from Asian traders. The information gained relevance after the brutal 9.7% correction in 5 days for the reason that $18,370 peak on Dec. 14.

Nonetheless, this indicator mustn’t essentially be considered as bullish as a result of the stablecoin might have been acquired to guard from draw back dangers in cryptocurrencies — which means traders have gotten extra bearish.

Leverage consumers slowly thrown within the towel

The long-to-short metric excludes externalities that may have solely impacted the stablecoin market. It additionally gathers information from alternate purchasers’ positions on the spot, perpetual, and quarterly futures contracts, thus providing higher data on how skilled merchants are positioned.

There are occasional methodological discrepancies between completely different exchanges, so readers ought to monitor modifications as a substitute of absolute figures.

As Bitcoin broke beneath the $16,800 help, skilled merchants decreased their leverage lengthy positions in keeping with the long-to-short indicator.

As an illustration, the ratio for Binance merchants barely declined from 1.11 on Dec. 14 to the present 1.04 stage. In the meantime, Huobi displayed a modest lower in its long-to-short ratio, with the indicator shifting from 1.01 to 0.05 in the identical interval.

Lastly, on the OKX alternate, the metric decreased from 1.00 on Dec. 14 to the present 0.98 ratio. So, on common, merchants have decreased their leverage-long ratio during the last 5 days, indicating lesser confidence available in the market.

A possible retest of $16,000 is probably going within the making

The average 101.8% stablecoin premium in Asia, paired with the knowledge of high merchants’ long-to-short indicator decline, tells a narrative of consumers progressively ceding to pessimism.

Moreover, the $206 million liquidation in lengthy BTC futures contracts alerts that consumers proceed to make use of extreme leverage, organising the proper storm for an additional leg of correction.

For now, the Bitcoin value continues to be closely depending on conventional inventory markets. Nonetheless, weak macroeconomic information and the uncertainty introduced by crypto auditing companies level to larger odds of a $16,000 Bitcoin retest.

The views, ideas and opinions expressed listed below are the authors’ alone and don’t essentially mirror or symbolize the views and opinions of Cointelegraph.