2 key Bitcoin trading indicators show that the price of BTC has bottomed
Bitcoin (Bitcoin) Since the crash on December 4, it has been struggling to maintain the $47,500 support level. This movement erased more than $840 million in leveraged long futures contracts.After the emergence of the Omicron variant of the coronavirus and recent data, a downward trend appears U.S. inflation hits 40-year high.
Although newcomers may have been frightened by the 26% price adjustment in the past month, whales and avid investors love MicroStrategy added their position. On December 9, MicroStrategy announced that they had acquired 1,434 Bitcoin, which increased their stake to 122,478 BTC.
Some analysts believe that the reason behind Bitcoin’s weakness is China’s leading real estate developer Evergrande, Defaulted on its U.S. dollar debt December 9. $110 million Bitcoin option expires December 10 may also be an important factor, as short positions made a profit of $300 million.
Margin traders are still very bullish
Margin trading allows investors to take advantage of their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrencies. When those savvy traders borrow Bitcoin, they use Bitcoin as collateral for shorting, which means they are betting that the price will fall.
This is why some analysts monitor the total loan amount of Bitcoin and stablecoins to gain insight into whether investors tend to be bullish or bearish. Interestingly, Bitfinex margin traders slightly reduced their long positions before the price crash on December 4.
Please note that this indicator holds a good 90% biased towards long positions, which means that stable currency borrowings only account for 10% of Bitfinex’s total. In addition, less than 24 hours after the price crash, margin bulls recovered 94%. This shows that even if these investors were surprised, most people maintained their positions throughout the campaign.
In order to confirm whether this change is specific to the instrument, the option market should also be analyzed. The 25% delta skew compares similar call (buy) and put (sell) options. When “fear” prevails, this indicator will turn positive because the premium of protective put options is higher than that of call options with similar risks.
When the market maker is bullish, the situation is just the opposite, causing the 25% delta to deflect into the negative zone. Readings between minus 8% and plus 8% are usually considered neutral.
Before the Bitcoin crash on December 4, the 25% delta deviation was close to 6%, which was considered neutral. Over the next 3 days, option market makers and whales showed moderate fear as the indicator reached a peak of 10%, but it is currently 3%.
Bitfinex’s long margin indicator and the main risk indicators for options show that there is almost no sign of pressure in the derivatives market. Considering that these markets are more commonly used by professional traders, one can begin to believe that Bitcoin will reach a record high in the beginning of 2022.
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