Looking to the Futures
Bitcoin futures fall as the need for crypto legislation comes under the spotlight
On Wednesday, we saw U.S. Treasury Secretary Scott Bessent testify at a hearing reviewing the Fiscal Year 20207 budget request for the Treasury. He brought up current and future plans on crypto policy and the need for the U.S. to pass legislation in front of the Senate Appropriations Subcommittee on Financial Services and General Government. Although current legislation has stalled for a few months on Capitol Hill, Bessent stressed that the United States has to be at the forefront as a technological leader in the world.
Two bills, the Digital Asset Market Clarity Act (Clarity Act) and the Digital Commodity Intermediaries Act, are currently working through the path of being passed. Bessent argued that these two versions need to be reconciled into one bill before hitting U.S. President Donald Trump’s desk. The Digital Commodity Intermediaries Act would give the Commodity Futures Trading Commission (CFTC) the authority to regulate digital commodity spot markets. Arguments for stalling the passing of the Act from the Senate are to ensure the CFTC is “fully constituted and adequately resourced” before a final deal is reached by all parties.
Bessent went on to argue that additional legislation will smooth over volatility in the crypto markets. Beta is a widely used measure of an asset’s volatility compared to a benchmark. A measure of above 1 would indicate higher volatility whereas a measure below 1 would be lower than the measured benchmark. Bitcoin’s historical beta measured against the S&P 500 ranges in the 1.50 to 3.00 range translating to more than a leveraged bet on the index as opposed to a currency hedge. During periods of market drawdowns, Bitcoin’s performance is significantly worse than the S&P. For example, from late January to late March we saw the E-mini S&P 500 Index futures (/ES) from peak to trough regress 9.7% off highs while Bitcoin futures (/BTC) regressed 26.9%.
Technicals
Looking at a Bitcoin Futures (/BTC) Chart we’ve noticed a base of higher lows forming in the 60,000 to 65,000 range. As these support ranges consolidate and push price higher, we’ve broken through the 50-day Simple Moving Average (SMA) and are currently testing the 100-day SMA as short-term resistance. Year to date we appear to still be in a bearish downtrend but since February we have posted a series of higher-highs and higher-lows. According to the CFTC Commitment of Trader’s Report published on April 23rd, dealers and asset managers remain long the futures contracts by a wide margin while leveraged funds are overwhelmingly short at over 50% of the open interest.
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