The legal battle between Binance cryptocurrency exchange and the U.S. Securities and Exchange Commission (SEC) took an unexpected turn on September 18. In a surprising move, Magistrate Judge Zia M. Faruqui rejected the SEC’s request for access to Binance.US’s systems and instead suggested that the SEC should formulate specific discovery requests. While this decision only temporarily postponed the need for Binance to demonstrate the separation between Binance.US’s custody solution and Binance International, the market responded positively.
As a result of this development, Bitcoin (BTC) experienced a surge in value and reached its highest level in three weeks, breaking above the $27,000 resistance. Traders are now questioning whether this rally is driven by leverage or genuine spot buying demand. To gain a better understanding, it’s important to analyze metrics related to Bitcoin derivatives.
In response to the rejection of the SEC’s request, Judge Faruqui scheduled a follow-up hearing for October 12 and requested that the involved parties submit a status report before the event. Although this may seem like a setback for the SEC, it could potentially increase the risks for Binance.
Despite a document from Binance.US on September 15 suggesting otherwise, Binance’s founder and CEO, Changpeng “CZ” Zhao, remains firm in asserting that Binance.US has never used Binance International’s custody solutions. The SEC, however, has yet to present clear evidence of Binance attempting to deceive the court.
Regardless of the current evidence, the outlook for Bitcoin bulls has significantly improved for the next three weeks, with no anticipated changes until the upcoming court hearing. To gauge the increasing optimism among professional traders, it is important to examine Bitcoin’s margin and derivatives metrics.
Margin markets provide valuable insights into the positioning of professional traders as they allow investors to increase their exposure through stablecoin borrowing. Recent data indicates that the margin-lending ratio for OKX traders has dropped to its lowest point in three months. This suggests that the dominance of leverage long positions has decreased, although the current ratio still favors the bulls.
Analyzing the activity in call (buy) options and put (sell) options can also provide an indication of market sentiment. The put-to-call ratio for Bitcoin options volume recently shifted from favoring put options to a balanced level, indicating reduced interest in protective puts. This suggests that professional traders were caught off guard by the price rally above $27,000.
Both Bitcoin margin and options markets indicate a balanced demand between long and short positions. This suggests that excessive leverage has not been utilized as Bitcoin’s price climbed. However, there was limited enthusiasm from buyers in the margin and options markets, which may provide some solace to bears.
Nonetheless, the data does suggest buying support from spot orders, indicating that larger entities, or so-called whales, are accumulating Bitcoin regardless of price. Moving forward, BTC and other crypto bulls have three more weeks until October 12, when the Federal Judge will convene another hearing and potentially issue orders that could pose challenges for Binance.US. In the meantime, a Bitcoin price rally above $28,000 is within the realm of possibility.
It is important to note that this article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect or represent the views of Cointelegraph.
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