Bears scattered as Bitcoin hit $40K, but pro traders remain cautious
Bitcoin has risen by nearly 2,000% since it was created in January 2009, and in the last quarter, hit an all-time high of $40,000. The digital currency is becoming increasingly popular, and its value seems to be stable, as long as you don’t consider bubbles bursting. But that doesn’t mean that Bitcoin is not prone to wild swings in price.
Even as the Bitcoin price soared to an all-time high of $41,000 over the weekend, some of the top traders in the world are still refusing to buy the digital currency. Many analysts say that at current prices, Bitcoin could easily handle another 100% surge, but with the current volatility, it’s hard to say how high it will go.
This week the price of Bitcoin fell below $40,000 and has lagged since hitting the all-time high of $20,000 in December. Those are extraordinary gains, even when compared to the average growth of more than 1,400% over the past year. (It’s worth noting that Bitcoin has had a more-than-two-year run of gains.) But while the bulls might be struggling, those who will be making Wall Street snares and bears’ jaws are the ones who have been in it for the long haul.. Read more about which crypto will go up today and let us know what you think.
Bitcoin (BTC) traders may be overjoyed with the recent 35 percent rise, but bearish need not be too concerned since a similar breakout occurred in mid-July, and the price failed to maintain the $40,000 support.
Let’s dissect the derivatives data and look at the futures contracts premium and options skew to see how optimistic investors are this time around. These indicators often indicate how experienced traders are valuing the chances of a retracement to $36,000.
Coinbase’s bitcoin pricing in US dollars. TradingView is the source of this information.
Bitcoin fell below $31,000 on June 8 and then rebounded to $41,000 six days later, despite the trend not being identical. The 32 percent rise resulted in the liquidation of $1.4 billion in Bitcoin short contracts over the course of the week. Bears were obviously surprised by this move, but Bitcoin was trading below $38,000 in less than three days, triggering a downturn.
As a result, bulls have cause to question the current rally’s long-term viability, given that no major developments have occurred to warrant the $40,000 level. Furthermore, the continuing FUD about miners’ departure from China, as well as Binance’s move to seek regulatory clearance, may keep the price down.
The futures premium has not recovered much.
The futures market premium, which quantifies the difference between monthly contracts and current spot market prices, is one of the greatest indicators of professional traders’ confidence. A 5 percent to 15% yearly premium is anticipated in strong markets. During bearish markets, however, a backwardation situation develops, and the signal fades or becomes negative.
Huobi offers a premium (basis) on Bitcoin 1-month futures. Skew is the source of this information.
The one-month futures contract has not been able to recoup an annualized premium more than 5%, as seen in the graph above. Over the past month, there have been several moments of backwardation, but the present level is considered neutral.
It’s also a good idea to look at options markets to rule out futures-specific externalities.
Bloomberg’s top analyst claims that $60K is now more probable than $20K for Bitcoin.
When market makers and professional traders are optimistic, call options will command a greater premium. A negative 25% delta skew indication will result from such a pattern.
The skew indicator, on the other hand, becomes positive as downside protection becomes more expensive.
Bitcoin options with a 25% delta skew from Deribit. laevitas.ch is the source of this information.
Fear is no longer an option, yet the present market is defined by neutrality.
The indicator is considered neutral when the figure oscillates between negative 10% and positive 10%. Between May 14 and July 24, the 25 percent delta skew indicator was indicating ‘worry.’
Even the current rise above $40,000, however, was unable to shift sentiment towards ‘greed,’ as the indicator remained neutral at minus 4%.
There is no indication of bullishness among professional traders, according to both derivatives measures. The 35 percent price increase may have broken a recent trend of dread, but it wasn’t enough to change public opinion.
The author’s thoughts and opinions are entirely his or her own and do not necessarily represent those of Cointelegraph.com. Every investing and trading choice has risk, so do your homework before making a decision.
The bulls have been running throughout the endless crypto winter, propping up many altcoins and driving bitcoin to new heights. But bitcoin’s recent rise to $40,000 isn’t necessarily a sign of a crypto apocalypse — it’s just a small sample of what’s to come.. Read more about bitcoin $4 billion options and let us know what you think.
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