2 key indicators for Bitcoin trading show the bottom of the BTC price
Bitcoin (BTC) has been around since the crash of the 4th. The downside comes after the advent of the Omicron variant of the coronavirus and recent data showing US inflation hit a 40-year high.
While newcomers may have feared the 26% price correction last month, whales and zealots like MicroStrategy have added to their positions. On December 9th, MicroStrategy announced that it had acquired 1,434 bitcoins and increased its stake to 122,478 BTC.
According to some analysts, the reason Bitcoin’s weakness was due to fear of contagion when Evergrande, a leading Chinese real estate developer, defaulted on its US dollar debt on Dec. 9, The Bears posted a profit of $ 300 million .
Margin traders remain extremely optimistic
Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to purchase additional cryptocurrencies. When these savvy traders borrow bitcoin, they use the coin as collateral for short sales, meaning they are betting on a price decline.
Because of this, some analysts are tracking all bitcoin and stablecoins lending to get a glimpse of whether investors are trending up or down. Interestingly, Bitfinex margin traders had cut their long-term purchases slightly before the December 4th price crash.
Note that this index has had 90% support for a while, which means that stable borrowing is only 10% of Bitfinex’s total volume. In addition, long-term margins rebounded 94% in less than 24 hours after the price crash. This shows that most hold their positions even when surprised.
To confirm whether this move is instrument specific, one should also analyze the options market. The 25% delta deviation compares call (buy) and put (sell) options similarly. The indicator becomes positive when “fear” prevails because the put premium is higher than with similar risky call options.
The opposite happens when the market makers are optimistic, which causes the 25% delta deviation to move into negative territory. Measured values between minus 8% and plus 8% are generally considered to be neutral.
The 25% delta deviation was hovering at nearly 6% prior to the December 4th Bitcoin crash, which is considered neutral. Over the next 3 days, option market makers and whales showed moderate fear as the indicator peaked at 10%, but it currently stands at 3%.
The Bitfinex Margin Long Index and the Options Key Risk Index show hardly any signs of stress in the derivatives market. Given that these markets are widely used by professional traders, one could believe the story that Bitcoin will hit a new all-time high in early 2022.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should do your own research when making a decision.