The first rule of Bitcoin (BTC) trading should be "expect the unexpected". In the last year alone, there have been five instances of daily gains of 20% or more, as well as five intraday declines of 18%. In fact, the volatility of the last 3 months has been relatively modest compared to recent spikes.
Whether it's billionaire institutional fund managers or retail investors, traders new to Bitcoin are often mesmerized by a 19% correction after a local ceiling. Even more shocking to many is the fact that the current correction of $ 13,360 from the all-time high of $ 69,000 on November 10 took place over nine days.
The downward movement did not cause alarming sales
Cryptocurrency traders are notoriously known for high-leverage trading and in the last 4 days almost $ 600 million in long (buy) Bitcoin futures contracts have been settled. That may sound like a pretty decent number, but it represents less than 2% of the total BTC futures markets.
The first evidence that the 19% drop to $ 56,000 marked a local bottom is the lack of a significant sell-off event despite strong price movement. Had there been excessive leverage of buyers at stake, a sign of an unhealthy market, open interest would have shown an abrupt turnaround, similar to that observed on September 7.
The risk indicator of the options markets remained calm
To determine how concerned professional traders are, investors should analyze the 25% delta bias. This indicator provides a reliable view of the feeling of "fear and greed" by comparing similar options to buy (buy) and sell (sell) side by side.
This metric will turn positive when the premium for neutral to bearish put options is higher than similar risk call options. This situation is generally considered a "scary" scenario. The opposite trend indicates optimism or "greed."
Values between 7% negative and 7% positive are considered neutral, so nothing out of the ordinary happened during the recent $ 56,000 support test. This indicator would have shot above 10% if professional traders and arbitrage traders had detected higher risks of a market crash.
Margin traders are still long
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position and thereby increase returns. For example, one can buy cryptocurrencies by borrowing Tether (USDT) and increasing your exposure. On the other hand, Bitcoin borrowers can only short sell it if they bet on the price decrease.
Unlike futures contracts, the balance between long and short spreads doesn't always match.
The chart above shows that traders have been borrowing more USDT recently as the ratio increased from 7 on November 10 to 13 today. The data is tilted higher because the indicator favors stablecoin borrowing by 13 times, so this could be reflecting its positive exposure. at the price of Bitcoin.
All of the above indicators show resistance against the recent BTC price drop. As mentioned above, anything can happen in crypto, but derivatives data suggests that $ 56,000 was the local fund.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.
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