The first rule of thumb for trading Bitcoin (BTC) is to “expect the unexpected.” In the last year alone, there have been five daily gains of 20% or more, as well as five intraday reductions of 18%. In truth, volatility over the past three months has been relatively modest compared to recent peaks.
Annual Bitcoin fluctuations over 90 days. Source: TradingView
Whether it’s multimillion-dollar institutional fund managers or retail investors, new bitcoin traders are often fascinated by a 19% correction after the local peak. Even more shocking to many, the current correction of $ 13,360 from the highest level of $ 69,000 on November 10 occurred in nine days.
This downward trend did not lead to alarming qualifications.
Cryptocurrency traders are known for their high-impact trading, and in the last four days alone, nearly $ 600 million of long (purchased) bitcoin futures contracts have been liquidated. This may sound like a decent enough number, but it accounts for less than 2% of the total BTC futures market.
Total open interest in bitcoin futures. Source: Coinglass.com
The first sign that the 19% fall to $ 56,000 represented a local bottom was the absence of a significant liquidation event despite the sharp price movement. If there was excessive purchasing power, which is a sign of an unhealthy market, open interest would show a dramatic change similar to that seen on 7 September.
Option Markets’ risk assessment remained low
To find out how concerned professional traders are, investors should analyze the 25% delta deviation. This indicator gives a reliable indication of feelings of “fear and greed” by comparing buy (buy) and sell (sell) options side by side.
This indicator will be positive if the premium for neutral put options is higher than for similar risky call options. This situation is usually considered a “fear” scenario. The opposite trend is for an upward or “greedy” trend.
Bitcoin Options 30 Days 25% Delta Shift. Source: Laevitas.ch
Values between negative 7% and positive 7% are considered neutral, so nothing unusual happened during the recent test of the $ 56,000 grant. This indicator can rise above 10% if professional traders and arbitrage traders discovered a higher risk of a market crash.
Margin traders are still buying
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position, thereby increasing profits. For example, you can buy cryptocurrency by borrowing Tether (USDT) and increasing your exposure. On the other hand, bitcoin borrowers can only sell them when they bet that the price will fall.
In contrast to futures contracts, the balance between long and margin positions is not always the same.
OKEx USDT / BTC margin lending ratio. Source: OKEx
The chart above shows that traders have borrowed more USDT in the past, with the ratio increasing from 7 to 10 November to 13 November. The data tends to be bullish as the index supports 13x loans of stablecoins, so this may reflect their positive exposure to the bitcoin price. …
All of the above indicators show resilience in the face of the recent fall in BTC prices. As mentioned earlier, anything can happen with cryptocurrency, but derivative data show that $ 56,000 was a local bottom.