Traders have been trying to time the much-anticipated trend reversal since Bitcoin (BTC) began its 48% correction to $ 30,000 on May 12. The move culminated in the liquidation of long futures positions valued at $ 12 billion, and trader confidence has been weakened somewhat to this day.
The community looked everywhere for signs of a turnaround, including technical patterns, US CPI inflation data, and Bitcoin deposits on exchanges. For example, some analysts claimed that a higher high followed by a move above $ 40,000 would be enough.
We need to make a new higher high to confirm a local low.
If you reclaim 40,000, we can talk about a sustained return to 50,000.#Bitcoin pic.twitter.com/myeWXIYWpp
to???? Immortal (@immortalcrypto) May 24, 2021
We need to mark a new higher high to confirm a local low.
We went back to $ 40,000 and can talk about a sustained increase to $ 50,000.
However, two days later, Bitcoin managed to exceed USD 40,000, despite the movement not lasting more than six hours. Meanwhile, other traders have concluded that there is a need to retest the $ 30,000 low before a possible rebound.
#Bitcoin $ BTC #BTC here forms a descending widening wedge. It’s bullish, but there are two possible scenarios.
Green: Break the resistance and maintain the uptrend.
Red: retest the bottom of the wedge (~ 30k) and jump off from there. pic.twitter.com/8L26kQvf7X
to???? Johnny Woo | Never DM for money (@ j0hnnyw00) May 25, 2021
Bitcoin forms a descending, expanding wedge here. It’s bullish, but there are two possible scenarios.
Green – break resistance and keep uptrend.
Red: Touch the bottom of the wedge ($ 30,000) again and walk up from there.
While there is empirical or even logical evidence to support such claims, market prices do not always respond to external news or previous chart formations. Unlike stocks, investors in Bitcoin cannot rely on commonly used valuation multiples or even benchmarks.
Of course, a digital store of value is an application, but at the same time uncensored and easily transferable. Additionally, some users appreciate the convertibility of Bitcoin to peer-to-peer fiat outside of KYC regulated exchanges. Another factor to consider is investors who are expanding their Bitcoin portfolio due to the lack of correlation with traditional financial assets.
This panacea of diverse and sometimes conflicting narratives creates barriers to modeling market potential, adoption status, and even measuring the effectiveness of recent developments.
Some will applaud Tesla and other big companies accumulating Bitcoin reserves, while others care little about who has BTC and focus on the challenges of scalability and fungibility.
The slope of the option delta: The professional indicator of fear and greed
With call options, the buyer can buy Bitcoin at a fixed price after the contract expires. Put options provide buyers with insurance and protect them from price drops.
When market makers and professional traders tend to be higher, they charge a higher premium for call options. This trend leads to a negative indicator for the slope of the options delta by 25%. On the other hand, if the downside protection is more expensive, the indicator is positive.
A 25% slope of the delta in the range of -10 to + 10% is generally considered neutral. That balanced situation lasted until May 16, when Bitcoin lost the critical support of $ 47,000 it had held for 76 days.
As the markets deteriorated, so did the indicator of the slope of the delta by 25% and the cost of hedging options skyrocketed. Therefore, until the metric sets a more neutral pattern near the 5% level, it seems premature to say that the market has already bottomed.
Active Bitcoin supply indicates that weak hands need to calm down
Traders also monitor the number of bitcoins that have been active recently. This indicator on its own cannot be considered bullish or bearish as it does not provide any information about the age of the directions in question.
The 500% price rally from October 1, 2020 to a high of $ 64,900 on April 14, 2021 resulted in a sharp spike in supply in the months leading up to the rally. If this metric shows a sharp decline, it indicates that investors are no longer interested in participating at the current price level.
Currently, 2.2 million Bitcoins have been moved in the last 30 days, which is well above the level before October 2020.
For now, traders shouldn’t believe that Bitcoin has hit rock bottom, at least until the market stops doing so much activity below $ 40,000.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade movement is associated with risks. You must do your own research when making a decision.