Bitcoin has been struggling since the crash of the 4th. The bearish move follows the arrival of the Omicron variant, and recent data shows that US inflation has hit a 40-year high.

Bitcoin price chart | Source: TradingView

While new entrants are likely to be frightened by the 26 percent price correction last month, whales and investors have certainly strengthened their positions. On December 9th, MicroStrategy announced it had bought an additional 1,434 Bitcoin, increasing its holdings to 122,478 BTC.

According to some analysts, the reason for Bitcoin’s weakness was the fear of contagion when the Chinese real estate giant Evergrande went down on December 9th. Options valued at $ 1.1 billion and $ 300 million in profit.

Margin traders are still extremely optimistic

Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to purchase additional cryptocurrencies. When these traders borrow bitcoins and use them as collateral for short positions, they bet on falling prices.

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, margin traders on Bitfinex had trimmed their long positions slightly before the December 4th price crash.

Bitcoin Total / Long Margin Percentage on Bitfinex | Source: Coinglass

Note that this metric is 90% of the long order preference, which means that the stablecoin loan is only 10% of the total Bitfinex. In addition, the long margin rebounded 94% in less than 24 hours after the price crash, showing that most of them held their positions during the price swings even when surprised.

In addition, investors should also analyze the options market. The 25% delta deviation compares similar call and put options. The indicator becomes positive when “fear” prevails because the put premium is higher than for call options with a similar risk.

The opposite happens when market makers are optimistic, which causes the 25% delta deviation to become negative. Results between negative 8% and positive 8% are generally considered neutral.

25% Delta Bitcoin Options on Deribit | Source: laevitas.ch

The 25% delta deviation was hovering at nearly 6% prior to the December 4th Bitcoin crash, which is considered neutral. Three days later, options market makers and whales showed moderate fear when the indicator peaked at 10%, but is now falling back to 3%.

The Bitfinex Long Margin 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, investors can slowly start to believe the narrative that Bitcoin will hit an all-time high (ATH) in early 2022.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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