Bitcoin ( BTC ) has remained within a narrow trading range since August 8, struggling to break the $62,000 threshold while maintaining support around $58,000. This period of consolidation reflects an increase in uncertainty among traders, particularly as the BTC futures funding rate continues to show negative values, indicating diminished leverage demand from buyers.

The key question is whether this indicator can solely influence the trajectory of the cryptocurrency market or if historical trends point towards a possible uptick.

Positive Trends in S&P 500 and Gold Challenge Bitcoin’s Momentum

One significant concern for Bitcoin enthusiasts is the robust performance of the S&P 500 index, which is currently just 2.5% shy of its all-time high. Additionally, gold is trailing by a mere 1% from its peak value. In such a scenario, it is difficult to justify Bitcoin’s position being 19.5% below its March 14 high of $73,757, whether viewed as a risky asset or a hedge against uncertainties in the US debt environment.

Investor sentiment regarding Bitcoin has further been affected by the ambiguous stance of Democratic presidential nominee Kamala Harris towards the cryptocurrency sector, featuring only vague campaign remarks. In contrast, Republican nominee Donald Trump has publicly declared intentions to remove Gary Gensler from his role as Chair of the US Securities and Exchange Commission (SEC), following criticism from industry leaders regarding Gensler’s lack of a clear regulatory framework for crypto businesses in the US.

Recent economic indicators that support the Federal Reserve’s (Fed) capacity to manage inflation without triggering a recession may also explain the dwindling interest in Bitcoin. Reports show a 1% rise in US retail sales for July, exceeding the forecasted 0.4% increase, alongside a reduction of 7,000 in initial jobless claims from the preceding week.

Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management US, mentioned to Yahoo Finance that a “soft landing is firmly in place,” indicating that a stronger macroeconomic backdrop favors the stock market, which, in turn, diminishes Bitcoin’s attractiveness as an independent store of value.

From a trading standpoint, the appetite for leverage in BTC futures contracts serves as a vital indicator of investor confidence. When market sentiment is positive, bullish participants generally engage in leveraged transactions, which drives the funding rates on perpetual contracts up into positive areas. Rates ranging from 0.2% to 1.2% per month usually indicate neutral market conditions, while rates below these figures signal a bearish outlook.

Data indicates that the funding rate for Bitcoin perpetual futures was primarily negative on August 14 and 15. The last time this metric approached bullish levels was on June 8, coinciding with Bitcoin’s test of the $72,000 resistance level. This scenario is logical since perpetual futures are the favored leverage tool among retail traders, while monthly contracts often trade at premiums or discounts compared to spot markets.

Declining Demand for Cryptocurrencies in China

To assess whether the lack of buyer confidence extends beyond perpetual futures, one should also analyze the demand for stablecoins in Chinese markets. Typically, significant retail interest in cryptocurrencies results in stablecoins trading at a premium of 2% or more over the official US dollar rate; a discount, however, often suggests fear, prompting traders to exit the cryptocurrency space.

On August 15, USDT was observed trading at a 0.2% discount in China, reflecting a decline in cryptocurrency demand. This marks a significant change from August 6, when traders were willing to pay a 2% premium for USDT, registering the lowest rate for this indicator in three months.

Considering BTC derivatives metrics alongside stablecoin demand in China, Bitcoin faces significant challenges in reclaiming the $62,000 support level. Nevertheless, historical trends suggest that retail traders often respond to market shifts rather than anticipate them, leaving room for potential breakout scenarios.

Note: This content is not intended as investment advice. All trading and investment activities carry risks, and individuals should conduct their own due diligence prior to making decisions.