3 reasons why Bitcoin fell to $56,500 may be a partial bottom


The first rule of Bitcoin (Bitcoin) The transaction should be “anticipating the unexpected”. In the past year alone, there have been 5 daily gains of 20% or more, and 5 intraday decreases of 18%. To be honest, the volatility of the past 3 months has been relatively mild compared to the most recent peak.

Bitcoin’s historical 90-day annualized volatility. Source: TradingView

Whether it is an institutional fund manager worth millions of dollars or a retail investor, traders who are new to Bitcoin are often fascinated by the 19% correction after the local peak. What is even more shocking to many people is that the current correction of $13,360 from the all-time high of $69,000 on November 10 occurred within 9 days.

The downward trend did not trigger a shocking liquidation

As we all know, cryptocurrency traders are known for their highly leveraged transactions. In the past 4 days, long (buy) Bitcoin futures contracts worth nearly $600 million have been liquidated. This may sound like a good number, but it only accounts for less than 2% of the total BTC futures market.

Bitcoin futures aggregates open positions. Source: Coinglass.com

The first evidence that the 19% drop to US$56,000 marks a partial bottom is that despite large price fluctuations, no major liquidation events have occurred. If the buyer’s leverage is too large, this is a sign of unhealthy markets, and there will be a sudden change in open positions, similar to the situation on September 7.

Risk indicators in the options market remain calm

In order to determine the level of concern for professional traders, investors should analyze the 25% delta skew. This indicator provides a reliable view of “fear and greed” sentiments by comparing similar call (buy) and put (sell) options side by side.

When the premium of a neutral to put put option is higher than that of a call option of similar risk, the indicator will become positive. This situation is usually considered a “fear” scenario. The opposite trend indicates bullishness or “greed.”

Bitcoin 30-day option 25% delta skew. Source: Laevitas.ch

Values ??between negative 7% and positive 7% are considered neutral, so no anomalies occurred during the most recent USD 56,000 support test. If professional traders and arbitrage traders detect that the risk of a market crash is higher, the indicator will soar to more than 10%.

Margin traders are still long

Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading positions, thereby increasing returns. For example, you can borrow Tether to buy cryptocurrency (USDT) And increase their exposure. On the other hand, Bitcoin borrowers can only be short when they bet that the price will fall.

Unlike futures contracts, the balance between long and short margin positions does not always match.

OKEx USDT/BTC margin loan ratio. Source: OKEx

The above chart shows that traders have recently borrowed more USDT, and the ratio has increased from 7 on November 10 to the current 13. Since this indicator is conducive to stablecoin borrowing by 13 times, the data is biased towards bullishness, so this may reflect their active exposure to Bitcoin prices.

In the face of the recent decline in BTC prices, all of the above indicators show resilience. As mentioned earlier, anything can happen in cryptocurrencies, but derivatives data indicates that $56,000 is the local bottom.

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