Bitcoin (BTC) has been struggling to hold the $ 47,500 support since the December 4 crash, a move that wiped out more than $ 840 million in leveraged long futures contracts. The downward movement came after the emergence of the Omicron variant of the Coronavirus and recent data showing US Inflation Hits 40-Year High.
While newcomers may have been spooked by the 26% price correction over the past month, whales and avid investors like MicroStrategy added to your positions. On December 9, MicroStrategy announced that it had acquired 1,434 Bitcoin, increasing its stake to 122,478 BTC.
According to some analysts, the reason behind Bitcoin's weakness was fears of contagion that Evergrande, a leading real estate developer in China, defaulted on your US dollar debt December 9. Bitcoin $ 1.1 Billion Options Expiration Dec. 10 could also have played a big factor as the bears pocketed a $ 300 million profit.
Margin traders remain extremely optimistic
Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrencies. When those smart traders borrow Bitcoin, they use the coins as collateral for the shorts, which means they are betting on a decline in price.
This is why some analysts monitor the total loan amounts of Bitcoin and stablecoins to get an idea of โโwhether investors are leaning bullish or bearish. Interestingly, Bitfinex margin traders cut their longs slightly ahead of the December 4 price drop.
Note that the indicator kept a decent 90% in favor of longs, which means that the stablecoin loan was only 10% of Bitfinex's total. In addition, the long margin recovered by 94% less than 24 hours after the price drop. This suggests that even if those investors were caught off guard, most held their positions throughout the move.
To confirm whether this movement was instrument specific, options markets should also be analyzed. The 25% delta bias compares similar call (buy) and put (sell) options. The indicator will turn positive when "fear" prevails, as the premium for hedging put options is higher than similar risk calls.
The opposite occurs when market makers are bullish, causing the 25% delta bias to shift into the negative area. Readings between negative 8% and positive 8% are generally considered neutral.
The 25% delta bias hovered close to 6% before Bitcoin's December 4 crash, which is considered neutral. Over the next 3 days, options market makers and whales showed moderate fear as the indicator peaked at 10% but currently stands at 3%.
Bitfinex's long margin metric and options core risk metric show little sign of stress in derivatives markets. Considering that these markets are used more frequently by professional traders, one can start to believe the narrative that Bitcoin will claim a new all-time high in early 2022.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and commercial movement involves a risk. You should do your own research when making a decision.
