Bitcoin has been attempting to break above the resistance at $27,500 for the past week but has been unsuccessful due to the risk of a potential United States default as the government struggles to approve the debt limit increase. Despite this, some analysts and investors believe that the debt ceiling dispute is just for show, as more money will ultimately enter the markets.
The US Debt Ceiling talks are all show.
They’re going to print the dollar into oblivion.
You need to own hard assets to protect your wealth.#Bitcoin is the fastest horse in the race.
— MacroJack (@macrojack21) May 17, 2023
MacroJack’s tweet connects Bitcoin’s digital scarcity to the possibility of generating more inflationary pressure. The stimulus measures, which involve raising the government debt limit, might seem advantageous at first because they prevent default and encourage economic activity. However, this can bring future budget restrictions as the debt interest payment rises.
Gold falls to 45-day low as Bitcoin prices increase
Bitcoin’s rise above $27,000 coincides with gold trading down by 2.5% between May 15 and May 18, reaching its lowest level in 45 days at $1,970. Meanwhile, on May 18, the U.S. Dollar Index, which measures the currency against a basket of foreign exchanges, hit its highest level in two months, indicating that the U.S. currency gained strength compared to its global counterparts.
It is important to note that this data should not be seen as a show of confidence in the government’s ability to prevent a shutdown, due to the negative global effect that would follow if the United States defaulted. For example, eurozone countries hold $1.54 trillion in U.S. Treasuries, with Japan holding $1.1 trillion, China $860 billion, and the United Kingdom $668 billion.
Equity markets remain resilient owing to strong macroeconomic data
Although the global economy could deteriorate in the coming months, the recent macroeconomic data has been mostly positive, allowing the S&P 500 index to remain marginally up in May, just 13% below its all-time high.
For example, retail sales in China increased by 18.4% year-over-year in April, while first-quarter gross domestic product in the eurozone rose 1.3% compared to the previous year. Retail sales in the United States grew by 0.5% year-over-year in April, slightly below expectations but far from being a sign of a recession.
Let’s examine Bitcoin derivatives metrics to get a better sense of how the market situation is affecting professional traders.
Bullish momentum is favored by Bitcoin futures and margin
Margin markets provide information on how professional traders are positioned by enabling investors to borrow cryptocurrency to increase their positions.
For instance, OKX provides a margin-lending gauge based on the stablecoin/BTC ratio. Traders can obtain more exposure by borrowing stablecoins to purchase Bitcoin. However, individuals who borrow Bitcoin can only bet on the cryptocurrency’s price decreasing.
The above chart shows that OKX traders’ margin-lending ratio increased between May 12 and May 17. This corresponds with the rise in Bitcoin’s price during this period, although it is not problematic since the current 31 margin-lending ratio is close to its 30-day average.
It is also important for investors to examine the BTC futures long-to-short metric since it renders external factors that could have only impacted the margin markets obsolete. There may be occasional methodological inconsistencies between exchanges, so readers should monitor changes rather than absolute figures.
Despite Bitcoin trading down by 8% since May 5, pro traders have recently increased their bullish positions to their highest level in two weeks, according to the long-to-short indicator.
For example, the ratio for OKX increased from 1.08 on May 12 to 1.25 on May 18. Similarly, the long-to-short ratio at Binance crypto exchange increased from 1.14 on May 12 to 1.25 on the current day.
Related: Bitcoin price capitulation below $26K possible as Friday’s BTC options expiry looms
Bitcoin bulls are in a favorable position as there has been low demand from short-sellers and no signs of undue leverage from buyers. In other words, Bitcoin’s market formation is bullish, and the odds favor a rally towards $28,000 if the U.S. debt ceiling standoff persists.
This article provides general information and should not be used or interpreted as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.
This article does not constitute investment advice or recommendations. As with any investment or trading decision, there are risks, and readers should conduct their own research.
