BTC price dips 3.5% as ‘overheated’ Bitcoin derivatives spark angst

Bitcoin (btc) broke below $35,000 after the Nov. 2 Wall Street open as analysis warned of "overheated" derivatives.

Bitcoin Undoes Post-Fed Gains

Data of Markets Cointelegraph Pro and TradingView tracked a retreating BTC price while erasing ground it regained overnight.

The largest cryptocurrency had reached new 18-month highs of $35,968 on Bitstamp before consolidating, a process that was gaining momentum at the time of writing.

The highs came thanks to encouraging language from Jerome Powell, chairman of the US Federal Reserve, who in a speech suggested that interest rate increases could end soon.

The Federal Reserve chose not to change rates at the last meeting of the Federal Open Market Committee, or FOMC, on November 1.

“Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Employment growth has moderated since the beginning of the year, but remains strong, and the unemployment rate has remained low. “Inflation remains high,” said an attached document. Press release fixed.

“The American banking system is strong and resilient. Tighter financial and credit conditions for households and businesses are likely to impact economic activity, hiring and inflation. The extent of these effects remains uncertain. The Committee remains very attentive to inflation risks.”

As Cointelegraph reported, $35,000 quickly became a key BTC price support level to hold for market participants once achieved. Meanwhile, the area above $34,500 was described as an "ideal" target for a local low.

#Bitcoin breaks out and reaches a new yearly high.

It is not a massive breakout, but as long as we stay above $34,800, the next target is between $36,500 and $37,000.#Altcoins to continue later. pic.twitter.com/3aCKwvoGXq

—Michaël van de Poppe (@CryptoMichNL) November 1, 2023

However, now down more than $1,000 from its highs, Bitcoin was worrying some, with derivatives markets particularly in the spotlight.

“All Bitcoin derivatives markets are overheated today,” said Charles Edwards, founder of quantitative Bitcoin and digital assets fund Capriole Investments. wrote in X along with Capriole's own data.

“This captures criminals, futures and options. Stay safe out there…”

In reaction, popular trader Skew agreed, arguing that it was now up to the spot markets to salvage BTC's price strength.

"Something to keep in mind when evaluating positions currently," he said. said X subscribers.

"When derivatives heat up, more and more attention is placed on the spot market to support current prices and trends."

The analysis warns about liquidity "pulls"

In its own analysis, tracking resource Material Indicators also concluded that “caution” should be applied to the current Bitcoin trading environment.

Related: 4 Signs Bitcoin Is Starting Its Next Bull Run

Uploading a snapshot of liquidity in the BTC/USDT order book for the largest global exchange, Binance, he warned that support levels could disappear quickly, a form of "pulling the rug."

Support for newcomers gaining liquidity at the time of writing stands at $34,000 and $33,500.

#FireCharts sample #BTC Liquidity moves through the order book again.

When liquidity blocks move in this manner, caution is warranted, because this type of movement often leads to pulls.

You can mitigate the risk of becoming resistant by waiting for buying to resume... pic.twitter.com/UCFNpiIoUe

— Material indicators (@MI_Algos) November 2, 2023

This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.