The flow of negative regulatory news regarding Bitcoin (BTC) and cryptocurrencies has not stopped over the past two weeks.
Today’s FUD – fear, uncertainty, and doubt – news that cites no action and only refreshes old information from China. A statement from the Chinese government revealed its intention to “crack down on Bitcoin’s mining and trading behavior.”
While retail traders are easily scared off by this type of news, whales and market makers know how to spot a buying opportunity, which was the case with today’s drop to $ 36,200.
China banned Bitcoin trading … in 2017
The Chinese Financial Stability and Development Committee minutes set out general guidelines on multiple issues, including reforming medium-sized financial institutions and cracking down on illegal securities activities. Therefore, it was neither a targeted attack on Bitcoin nor the actions and speeches of previous years.
On May 18, trade associations under the People’s Bank of China warned financial institutions and other member organizations not to engage in crypto business transactions.
However, cryptocurrency trading in China has been banned since September 2017, and concerns about carbon emissions from Bitcoin’s mining operations were voiced over three weeks ago by Chinese state media PengPai.
Even market-making platforms have been targeted by Chinese authorities since 2018. Some crypto-commerce sites continued to operate illegally in the country, but most were identified and shut down by authorities in 2019.
Derived indicators signal an accumulation
The data provided by the stock market highlights the net long-short positioning of traders. By analyzing the position of each client on perpetual and futures contracts, one can get a clearer view of the trend of professional traders up or down.
Whales and market makers on OKEx hit a long-short ratio of 1.08 in the early hours of May 21, favoring buyers by 8%. It should be noted that this level was the lowest in 30 days, indicating a lack of conviction. However, these professional traders entered bullish positions during the day as Bitcoin fell below $ 37,000 favoring buyers by 62%.
Volume peaks confirm the theory
Trade volume is the best indicator to confirm whale activity, and these peaks should coincide with low prices. Even though every trade has a buyer and a seller, extreme volatility can occur on low trading volumes, therefore not necessarily involving professional traders.
Looking at the data above, there should be no doubt that whales and market makers aggressively bought the $ 36,200 drop on May 21. Spot exchange volumes topped $ 5.6 billion in four hours, which is extreme even for a 12% price move.
To put it in perspective, the average daily volume over the past month is $ 11 billion. Therefore, by combining this data with the long / short ratio of derivatives exchanges, one should assume that some heavy players had the courage to buy today’s downside.
While no one can accurately predict whether $ 35,200 will stand over the weekend, expect these heavy hands to hold their position for a very long time.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You need to do your own research when making a decision.