2 key Bitcoin trading metrics suggest BTC price has bottomed

As the digital currency market continues to experience a period of consolidation, BTC price has continued its steady decline. Based on two key trading metrics, it appears Bitcoin is near bottom and preparing for upward movement soon.

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The “why did bitcoin spike” is a question that many people are asking. The 2 key Bitcoin trading metrics suggest BTC price has bottomed.

Since the December 4 meltdown, Bitcoin (BTC) has struggled to maintain the $47,500 support level, a movement that wiped out almost $840 million in leveraged long futures contracts. After the advent of the Omicron version of the Coronavirus and recent statistics showing U.S. inflation reaching a 40-year high, the market took a dive. 

2-key-Bitcoin-trading-metrics-suggest-BTC-price-has-bottomedFTX’s Bitcoin/USD rate. TradingView is the source of this information.

While newbies may have been alarmed by the 26% price drop in the last month, whales and experienced investors such as MicroStrategy increased their holdings. MicroStrategy revealed on December 9 that they had purchased 1,434 Bitcoin, bringing their total investment to 122,478 BTC.

According to several observers, Bitcoin’s weakness stemmed from a fear of contagion when Evergrande, a major Chinese property developer, defaulted on its US dollar debt on December 9. Bears made a $300 million profit on the $1.1 Bitcoin billion options expiration on Dec. 10, which might have played a role.

Margin traders are still quite optimistic.

Margin trading lets investors to leverage their holdings by borrowing stablecoins and then buying additional cryptocurrency with the profits. When those astute traders borrow Bitcoin, they use it as collateral for short positions, which means they are betting on a price drop.

As a result, some experts keep track of total loan amounts for Bitcoin and stablecoins to see whether investors are optimistic or pessimistic. Surprisingly, Bitfinex margin traders cut their long positions ahead of the price drop on December 4th.

1639343046_426_2-key-Bitcoin-trading-metrics-suggest-BTC-price-has-bottomedBTC margin long/total % on Bitfinex. Coinglass is the source of this information.

It’s worth noting that the indicator favored longs by 90%, implying that stablecoin borrowing accounted for just 10% of Bitfinex’s total. Furthermore, less than 24 hours after the price drop, the margin longs rebounded by 94 percent. This indicates that, even though the investors were taken off guard, the majority of them maintained their positions throughout the movement.

It’s also worth looking into options markets to see whether this movement was unique to the instrument. The 25 percent delta skew compares call (buy) and put (sell) options that are comparable. When “fear” is prominent, the indicator will become positive because the premium for protective put options is greater than for equivalent risk call options.

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When market makers are optimistic, the 25 percent delta skew shifts to the negative side, leading the 25 percent delta skew to move to the negative side. Neutral readings are those that fall within the negative and positive 8% range.

1639343047_194_2-key-Bitcoin-trading-metrics-suggest-BTC-price-has-bottomedBitcoin options with a 25% delta skew from Deribit. laevitas.ch is the source of this information.

Prior to the December 4 Bitcoin meltdown, the 25 percent delta skew was at 6%, which is considered neutral. The options market makers and whales demonstrated considerable panic during the following three days, as the indicator peaked at 10%, but now sits at 3%.

In derivatives markets, the Bitfinex margin long measure and the options main risk metric show minimal indications of stress. Given that professional traders are more likely to utilize these marketplaces, one might begin to anticipate that Bitcoin will set a new all-time high in early 2022.

The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.

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Related Tags

  • does crypto trade 24/7
  • bitcoin prices history
  • what did bitcoin start at

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