Bear pressure as Bitcoin price returns to $ 41,000

Bitcoin traders say it will take $ 43,600 to restore the bullish trend, but futures and options data are showing signs of exhaustion.

“Don’t go against the trend” is a well-known saying in the market and there are similar sayings like “Never catch a falling knife”. The bottom line is that traders shouldn’t try to predict trend reversals or, worse, try to get average price improvements while losing.

It doesn’t matter whether you’re trading soybean futures, silver, stocks, or cryptocurrencies. Markets often move in cycles that can last from a few days to several years. In the case of Bitcoin, hardly anyone can justify the bullish case by looking at the graph below.

Bitcoin price chart | Source: TradingView

In the past 25 days, all attempts to break the descending channel have failed. Bizarrely, a dip below $ 40,000 in mid-October would be the final deadline for the SEC’s decision on the ProShares Bitcoin ETF (May 18). 10) and Invesco’s Bitcoin ETF (October 19).

follow report Weekly by CoinShares, the latest price action sparked institutional inflows for the sixth straight week. Almost $ 100 million was raised between September 20 and September 24.

Seasoned traders suggest that Bitcoin must recapture the support level of $ 43,600 in order for the uptrend to continue. Meanwhile, on-chain data shows massive accumulation as supply on the exchanges decreases.

Perpetual futures show that traders are neutral on the downside

To measure investor sentiment, one should analyze funding rates for perpetual contracts as this is the preferred tool for retailers. In contrast to monthly contracts, perpetual futures contracts are traded at a price that is very similar to the regular spot exchanges.

The funding rate is automatically calculated every 8 hours from the time Long (buyer) requests more leverage. However, if the situation is reversed and the short (seller) order is overutilized, the funding rate becomes negative and the shorter becomes the payer.

8-hour financing rate of Bitcoin Perpetual Futures | Source: Bybt

A “neutral” situation that involves the use of leverage on a long position pays a small fee ranging from 0% to 0.03% over an 8 hour period, which is 0.6% per week. However, the graph above shows a slight downtrend since September 13th, when the funding rate was last above 0.03%.

Put-to-call ratio favors bulls, but the trend has changed

In contrast to futures, options are divided into two segments. Call options allow the buyer to buy Bitcoin at a fixed price on the expiration date. Generally they are used in neutral arbitrage or bullish strategies.

Put options, on the other hand, are often used to protect against negative price movements.

To understand how this put-to-call ratio is balanced, one should compare call and put options.

Put-to-Call OI Ratio of Bitcoin Options | Source: Laevitas.ch

The indicator bottomed at 0.47 on August 29, reflecting 50,000 BTC put options accumulated from 104,000 BTC call options. However, the gap has narrowed as the use of neutral to bearish short contracts gains traction after the September 24th monthly expiration.

According to Bitcoin futures and options markets, it may seem too early to call a “bearish” period, but the past two weeks have shown no signs of upward trends in derivatives market indices. It seems like the bulls are hoping the ETF phasing out breaks the current market structure.

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Mr. Teacher

According to Cointelegraph

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