The phrase "hindsight is 20/20" is a perfect expression for financial markets because every price chart pattern and analysis is obvious after the move has occurred.
For example, the traders who played the February 28 bombshell that took Bitcoin (BTC) above $43,000 should have known the price would face some resistance. Considering that the market had previously rejected $44,500 in multiple instances, asking for a retest below $40,000 made a lot of sense, right?
This is a common fallacy, known as "post hoc" in which an event is said to be the cause of a later event simply because it happened before. The truth is that one will always find analysts and experts calling for continuation and rejection after a significant price move.
Usually after strong #bitcoin rallies like the one we just saw today, we tend to keep going.
As I said before, the sheer disbelief during this rally makes me bullish for the short term.
Still no guarantee of new highs immediately, but at least maybe a local uptrend.
— Benjamin Cowen (@intocryptoverse) March 1, 2022
Meanwhile, on March 2, Cointelegraph reported that Bitcoin "could force $34K retestThe analysis cited "sick momentum" because Russia had just announced its invasion of Ukraine.
Over the last seven days, the performance of the aggregate market capitalization of the cryptocurrency market showed a retracement of 11.5% to $1.76 trillion and this move erased the gains of the previous week. Large-cap assets like Bitcoin, Ether (ETH) and Earth (MOON) were equally affected, reflecting almost 12% losses in the period.
Only two tokens were able to present positive performances in the last seven days. WAVES bounced back for the second week in a row as the network update to become advanced compatible with Ethereum Virtual Machine (EVM). The transition is scheduled to begin in the spring and the new consensus mechanism will provide a "smoother transition to Waves 2.0."
THORChain (RUNE) jumped after completing his Terra (MOON) ecosystem integration, allowing the blockchain to be compatible with all Cosmos-based projects. ThorChain users now have more trading and staking options available, including the TerraUSD (UST) stablecoin.
Funding rates turned positive
Perpetual contracts, also known as reverse swaps, have a built-in fee that is typically charged every eight hours. Perpetual futures are the preferred derivatives of retail traders because their price tends to follow regular spot markets perfectly.
Exchanges use this fee to avoid currency risk imbalances. A positive funding rate indicates that long buyers require more leverage. However, the opposite situation occurs when short sellers require additional leverage, causing the funding rate to turn negative.
Notice how the seven-day cumulative funding rate turned positive across all four major currencies. These data indicate a slightly higher demand from longs (buyers), but it is not yet significant. For example, Bitcoin's 0.10% positive weekly rate equals 0.4% per month, which is not complicated for traders building futures positions.
Normally, when there is an imbalance caused by excessive optimism, the rate can easily exceed 4.6% per month.
Options data is trading on a potential price crash
Currently, there is no clear direction in the market, but the 25% delta options bias is a telltale sign whenever market makers overcharge for upside or downside protection.
If professional traders fear a Bitcoin price drop, the bias indicator will move above 10%. On the other hand, widespread enthusiasm reflects a negative bias of 10%.
As shown above, the bias indicator stood at 10% through March 4, but dropped slightly to 7-8% during the week. Despite this, the indicator shows that professional traders are pricing in higher odds of a market downturn.
There are mixed sentiments from futures data from retail traders, showing a shift away from slightly negative sentiment against options market makers pricing in a higher risk of a further drop.
Some might say that the third failure to break the $44,500 resistance was the nail in the coffin because Bitcoin showed no strength during a period of global macroeconomic uncertainty and strong demand for commodities.
On the other hand, the current $1.76 trillion market capitalization of the crypto sector can hardly be considered a failed one, so there is still hope for buyers.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
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