3 reasons Bitcoin falls to 56.5k could be a local low
The first rule of Bitcoin (BTC) trading should be “expect the unexpected”. In the past year alone, there have been five cases of a daily increase of 20% or more and five cases of a decrease of 18% a day. To be honest, the volatility over the past three months has been relatively modest compared to recent highs.
Whether they are multi-million dollar institutional fund managers or retail investors, Bitcoin newbies are often intrigued by the 19% correction after a local top. Even more shocking to many is the current nine-day correction of $ 13,360 from the November 10th all-time high of $ 69,000.
The downward movement does not trigger any alarming incremental liquidations
Cryptocurrency traders are known for their high leverage trading and almost $ 600 million in Bitcoin long futures (purchases) have been liquidated in the last 4 days alone. That sounds like a decent number, but it accounts for less than 2% of the total BTC futures market.
The first evidence that the 19% decline to $ 56,000 marked a local low was the lack of a significant liquidation event despite price volatility. When there is too much leverage on the buyer, a sign of an unhealthy market, the open interest will show a sudden change, similar to September 7th.
The options market’s measure of risk remains calm
To determine the fear level of professional traders, investors should analyze the deviation from Delta 25%. This indicator provides a reliable overview of the sentiment of fear and greed by comparing similar call (buy) and put (sell) options side by side.
This metric becomes positive if the premium of the neutral to bearish put option is higher than that of calls with a similar risk. This situation is often referred to as the “fear” scenario. The opposite trend signals a bullish or “greedy” trend.
Values of negative 7% to 7% positive are considered neutral, so nothing extraordinary happened in the most recent test of the $ 56,000 support. This indicator will rise above 10% when professional traders and arbitrageurs recognize a higher risk of a market crash.
Margin traders are still a long-term continuation
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading positions and thus increase profits. For example, one can buy cryptocurrencies by borrowing Tether (USDT) and increasing their visibility. Bitcoin borrowers, on the other hand, can only sell short if they are betting on a price decline.
Unlike futures, the balance between long margin and short selling is not always the same.
The graph above shows that traders have borrowed more USDT lately as the interest rate rose from 7 on November 10 to currently 13. at the Bitcoin price.
All of the above indicators suggest resilience in the face of BTC’s recent decline. As mentioned before, anything can happen in crypto, but derivative data shows that $ 56,000 is the local low.
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