A bullish Bitcoin market fails to hold $21K, but pro traders remain unconvinced of a bearish shift

Key points: 

• Investors are now less confident that the $20,000 support level can hold.

• Data reflects the reluctance of professional traders to add leveraged long positions.

• Nonetheless, they also use stablecoin margin loans to hold bullish positions.

147 days have passed since Bitcoin settled above $25,000, and the result is that investors are less confident that the $20,000 support level can hold. Underpinning those concerns were persistent global financial and macroeconomic tensions, which escalated on Nov. 7 after European Union officials raised concerns about a $369 billion U.S. anti-inflation bill.

The expanded tax, health and climate bill, passed in August, also includes subsidies for North American-made electric vehicles and the battery supply chain.

According to CNBC, this is not the first time Europe has expressed concern over international trade rules and "discriminatory" measures.

Additional uncertainty comes from the Nov. 8 U.S. midterm elections, which will determine which party controls Congress. Democrats currently hold a majority in the lower house, but changing that could ease President Biden's future spending plans.

In other news, Apple announced a temporary reduction in iPhone 14 production due to COVID-19 restrictions in China. In the long run, Apple's $2.2 trillion market cap has surpassed that of Alphabet (Google) and Amazon combined.

Let’s take a look at Bitcoin derivatives data to see if deteriorating global macroeconomic conditions are affecting crypto investors.

Professional traders not thrilled with a rally above $21,000

Retailers typically avoid quarterly futures due to price differences from the spot market. Nonetheless, they are the tool of choice for professional traders because they avoid the volatility in funding rates that often occurs in perpetual futures contracts.

In a healthy market, the annualized premium on three-month futures should be between +4% and +8% to cover costs and associated risks. The chart above shows that derivatives traders have remained neutral to bearish over the past week as Bitcoin futures premiums have remained below 2.5% throughout.

More importantly, the metric failed to improve after BTC surged 7% between Nov. 3 and 5 to test resistance at $21,500. The price level is the highest since Sept. 13, so the data reflects the reluctance of professional traders to add leveraged long positions.

Margin markets show bullish resilience

Traders should also analyze the margin trading market to understand where professional traders are positioned. Margin trading allows investors to borrow cryptocurrencies to leverage their trading positions. For example, exposure can be increased by borrowing stablecoins to purchase additional Bitcoin positions.

Bitcoin borrowers, on the other hand, can only short the cryptocurrency because they are betting that its price will fall. However, unlike futures contracts, the balance between margin longs and shorts is not always balanced.

Data shows that the margin borrowing ratio of OKX traders has remained relatively stable at 8 over the past week. On the one hand, the indicator is a bit concerning, showing a rebound from $20,050 to $21,475 on Nov. 5, which should have a positive impact on the margin loan ratio. The current 8.1 level leaves plenty of room for continued leveraged buying pressure.

The indicator remains bullish as it favors stablecoin lending. In short, professional traders use stablecoin margin loans to hold bullish positions.

Futures and margin indicators suggest that Bitcoin’s failure to hold support at $21,000 was not enough to cause panic among professional traders. The data also showed a moderate level of indifference, as the recent 7% rally to $21,500 was not accompanied by higher demand for leveraged longs.

Bears continue to wield their power even further away from the elusive daily close of $25,000. Bulls may be less keen to see a more sustained rally until macroeconomic conditions and political uncertainty hit the headlines.