Bitcoin

3 Important metrics and disinterest from professional traders indicate a possible sell-off at the current Bitcoin price

For beginners, FOMO can be a very heavy burden. Resist the urge to buy Bitcoin (BTC) After a rally of nearly 15% in which the price broke the $ 12,000 and $ 13,000 levels in less than 24 hours, this is virtually impossible.

Professional traders are more experienced and know exactly how to play these FOMO-inducing situations. As the data showed, the majority was Open short positions until October 20th just before the price broke above $ 12,000.

Aggregated Bitcoin Futures Settlements. Source: Coinalyze.net

Most investors fail to understand that being a professional trader does not mean that all emerging trends will be used for profit. Instead, survival when things go wrong is the real success factor.

3 Important metrics and disinterest from professional traders indicate a possible sell-off at the current Bitcoin price
3 Important metrics and disinterest from professional traders indicate a possible sell-off at the current Bitcoin price

When Bitcoin soared to $ 13,217, there were liquidations totaling $ 350 million. and the funding rate for the futures contracts shows that there was no excessive leverage.

For perpetual contracts, also known as reverse swaps, there is an insertion fee that is typically charged every eight hours. When short positions require the greatest leverage, the funding rate becomes negative. Hence, it is these shorts that pay the commissions.

Funding rate for perpetual Bitcoin contracts. Source: Digital asset data

The graph above shows that such a situation has not occurred in the past few weeks, at least not in a significant way. As a result, despite selling before the price hit, the big traders were not forced to part with their leveraged short positions.

The data shows that Professional traders covered their short positions on October 21st and stayed away from bullish bets. This action is supported by both the long-short ratio of major cryptocurrency exchanges traders and the premium of futures contracts.

Professional traders have their shorts hedged but are unwilling to bet long term

According to the relationship Between longs (buyers) and shorts (sellers) on Huobi there is no evidence of aggressive buying. The data shows that large traders are unsure whether the current trend is sustainable despite some hedging activity on their short positions.

Long / short relationship of the main Huobi dealers. Source: Huobi

The long / short ratio had remained relatively neutral through October 21. Suddenly, Large traders took a short position when BTC broke the resistance at USD 12,500. This morning when BTC refused to lose ground These traders began to hedge their short positions.

Still for the moment There are no signs of bullish bets as the latest Huobi data, which favored long positions by 10%, was received two weeks ago.

OKEx long / shorts ratio. Source: OKEx

A similar pattern emerged with the large OKEx dealers: although a short sale occurred before $ 12,000. This indicator continues to favor shorts, a trend that emerged in mid-September and has continued since then.

To confirm whether the sentiment has changed, you need to know the premium on futures contracts. These contracts tend to trade at a slight premium in healthy markets for each asset class.

Bull markets will cause futures contract sellers to charge a higher price to postpone rather than sell on the regular spot markets. If the current level of USD 13,000 has managed to restore the upward momentum, this should be reflected in this indicator.

January futures contract premium. Source: Digital asset data

As Cointelegraph and Digital Assets Data show The current premium of 1.8% is the same as it was three weeks ago when Bitcoin was at $ 11,500. These data are further evidence of this Large traders have since been unconfident about buying Bitcoin, despite a 13% price hike.

The options markets suffered from some turbulence

Implied volatility is the main metric that can be extracted from the option price. Whenever traders perceive a greater risk due to greater price fluctuations, The display moves up. The opposite occurs during times when the price is stable or there is little expectation of price fluctuation.

Implied volatility of 3 month bitcoin options. Source: Aslant

Bitcoin’s implied volatility has been falling for the past six weeks, but yesterday’s move seems to have surprised options traders. Not only did the indicator rise from 55% to 70%, but the volume traded in options contracts (USD 575 million) was three times higher than the average.

The unexpected peak of volatility and the resulting partial retreat to the current level of 64% indicate that some traders were poorly positioned and had to abruptly close their positions.

according to the Black-Scholes model, An implied volatility movement of 15% means that the price of the call option (call) moves 40% from USD 14,000 in December. This change shows that events like yesterday’s are sensitive to leveraged traders as leverage greater than three times that would have been liquidated.

After the long / short ratio and the premium of the futures contracts, there is little relevant buying activity by the main traders. This disinterest arouses a yellow flag Data from the chain shows that 22% of the total BTC supply was processed when the price of Bitcoin surged above $ 13,000, an all-time high.

This move could be a potential sign that large companies are preparing to sell. It must be noted, however, that out-of-market (OTC) transactions, unless these Bitcoin have been transferred to exchanges, tend to have less of an impact on the price.

The views and opinions expressed here are solely those of darer and do not necessarily reflect the views of Cointelegraph. Every investment and business move is associated with risks. You must do your own research when making a decision.

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