Značka: BTC derivatives

Bitcoin price can’t find its footing, but BTC fundamentals inspire confidence in traders

Bitcoin’s (BTC) sudden crash on Jan. 10 caused the price to trade below $40,000 for the first time in 110 days and this was a wake-up call to leveraged traders. $1.9 billion worth of long (buy) futures contracts were liquidated that week, causing the morale among traders to plunge.The crypto “Fear & Greed” index, which ranges from 0 “extreme fear” to 100 “greed” reached 10 on Jan. 10, the lowest level it has been since the Mar. 2020 crash. The indicator measures traders’ sentiment using historical volatility, market momentum, volume, Bitcoin dominance and social media.As usual, the panic turned out to be a buying opportunity because the total crypto market capitalization rose by 13.5%, going from a $1.85 trillion bottom to $2.1 trillion in less than three days. Currently, investors seem to be digesting this week’s economic data that shows United States December 2021 retail sales going down by 1.9% compared to the previous month.Investors have reason to worry about stagflation, a scenario where inflation accelerates despite the lack of economic growth. However, even if this eventually proves that Bitcoin’s digital scarcity is a positive characteristic, markets will still take shelter with whatever asset is deemed safe. Thus, the first wave will potentially be damaging for cryptocurrencies.Top weekly winners and losers on Jan. 17. Source: NomicsBitcoin price was flat over the past seven days, effectively underperforming the altcoin market’s 7% gain. Part of this unusual movement can be explained by layer-1 decentralized applications platforms showing a positive performance that was driven by Fantom (FTM), Cardano (ADA), Near Protocol (NEAR) and Harmony (ONE).Loopring (LRC), a zkRollup open protocol for decentralized exchanges on Ethereum, presented the worst performance of the week. The DEX volume using the protocol peaked at $30 million per day in early December 2021, but is now near $6 million. Meanwhile, Dfinity (ICP) and Chainlink (LINK) are adjusting after a 40% or higher rally in the first 10 days of 2022.Tether’s premium and the futures premium held up wellThe OKEx Tether (USDT) premium or discount measures the difference between China-based peer-to-peer (P2P) trades and the official U.S. dollar. Figures above 100% indicate excessive demand for cryptocurrency investing. On the other hand, a 5% discount usually indicates heavy selling activity.OKEx USDT peer-to-peer premium vs. USD. Source: OKExThe Tether indicator bottomed at a 3% discount on Dec. 31, which is slightly bearish but not alarming. However, this metric has held a decent 2% discount over the past week, signaling no panic selling from China-based traders.To further prove that the crypto market structure has held, traders should analyze the CME’s Bitcoin futures contracts premium. That metric analyzes the difference between longer-term futures contracts to the current spot price in regular markets.Whenever this indicator fades or turns negative, it is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.BTC CME 2-month forward contract premium vs. Bitcoin/USD. Source: TradingViewThese fixed-month contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlements for longer. As a result, futures should trade at a 0.5% to 2% premium in healthy markets, a situation known as contango.Notice how the indicator flipped negative on Dec. 9 as Bitcoin traded below $49,000 but it still managed to sustain a slightly positive number. This shows that institutional traders display a lack of confidence, although it is not yet a bearish structure.Considering that the aggregate cryptocurrency market capitalization is down 9.5% to date, the market structure held rather nicely. The CME futures premium would have gone negative if there had been excessive demand for short-sellers. Unless these fundamentals change significantly, there is not yet sufficient information available that would support calls for a sub-$40,000 Bitcoin price.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin's $6.1 billion options expiry was not enough to break the bearish sentiment

Bitcoin’s (BTC) price has been ranging between $46,000 and $52,000 for 26 days. Despite the large nominal $6.1 billion year-end options expiry, the bullish and bearish instruments were evenly balanced between $44,000 and $49,000.Therefore, it was no surprise that the $47,175 price at 8:00 am UTC on Dec. 31 brought little change to the price structure. Even the 3% rally to $48,500 following the event failed to sustain itself, signaling that bears are unwilling to cede their upper hand.Bitcoin/USD price on Coinbase. Source: TradingViewBulls might have interpreted the 9,925 BTC leaving Coinbase in 24 hours as a positive trigger, considering fewer coins are available on exchanges for newcomers. Besides, the first week of the year has been positive for the past four years, averaging 18.5% gains for Bitcoin holders.To further support bulls’ thesis, the United States listed tech company MicroStrategy added another 1,914 BTC to their balance sheet on Dec. 30. On the negative side, regulation continues to pressure the markets as South Korean exchanges require users to verify their third-party wallet addresses to comply with the Financial Action Task Force (FATF) travel rule guidelines.Bitcoin had a stellar 2021 anywayRegardless of the short-term bearishness behind December’s 16% price drop, Bitcoin continues to vastly outperform both U.S. stocks and gold for the third year in a row. Yet, that performance was not enough to avoid every $48,000 and higher call (buy) option instrument becoming worthless as the Dec. 31 expiry price came in lower.Bitcoin options aggregate open interest for Dec. 31. Source: Coinglass.comAt first sight, the $4.0 billion call (buy) options vastly outperformed the $2.1 billion put (sell) instruments, but the 1.9 call-to-put ratio is deceptive because the 16% price drop from Nov.’s $57,000 close wiped out most of the bullish bets. Therefore, there is no value in the right to buy Bitcoin (call option) at $50,000 if it is trading below that price.Bulls and bears instruments were evenly marched for the Dec. 31 Bitcoin options expiry, which came in much smaller than expected at $660 million. Yet, bears were unable to take control as 85% of their bets have been placed at $47,000 or below. Such data partially explains why the Dec. 31 expiry was followed by an attempt from bulls to regain momentum.Will the first week of 2022 finally be able to revert the slightly negative sentiment that has prevailed since the Dec. 3 crash? Unfortunately, according to Bitcoin options markets, there is no indication that the tide has changed.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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