Quiet! Data suggests that a $ 9,000 decline in Bitcoin price is not a trend reversal

After the price of Bitcoin (BTC) flirted at an all-time high of $ 42,000 on Jan. 8, it stabilized in a narrow range between $ 39,000 and $ 41,500 for two days. and the pennant structure in shorter periods suggested a breakout toward $ 45,000 was possible.

All of that suddenly changed on January 10th when the support broke at USD 39,000 and the price of Bitcoin was revised sharply.

BTC / USD 4 hour chart. Source: TradingView

A staggering and gruesome drop of 26.6% caused BTC to surge to $ 30,100 in the next 30 hours and $ 1.5 billion of cascading settlements on derivatives exchanges sped the correction. Interestingly, this happened just as the open interest in BTC futures hit an all-time high of $ 12.7 billion.

Open interest in BTC futures on derivatives exchanges (in USD). Source:
Quiet! Data suggests that a $ 9,000 decline in Bitcoin price is not a trend reversal
Quiet! Data suggests that a $ 9,000 decline in Bitcoin price is not a trend reversal

Today’s price movement shows a history of tragedy, pessimism and sell-outs. What nobody mentions, however, is that the price of Bitcoin fell 20.4% just a week ago when it tested values ​​below $ 28,000.

During this similar event, contracts were executed in long positions totaling $ 1.2 billion. So today’s price movement is not much different from that of the market a week ago on January 11th.

BTC / USD 4 hour chart. Source: TradingView

As can be seen in the previous graphic, BTC rose 11% per hour after breaking below the $ 28,000 level. What may have surprised traders this time around was the 13% rebound from $ 32,200 to $ 36,400, which created a false low.

To understand whether this is the case, you need to analyze the ratio of short and long positions and the hourly billing of the top traders on cryptocurrency exchanges.

OKEx’s top dealers bought the roof

The data provided by an exchange clarifies the net positioning between long and short positions of traders. By analyzing each client’s position in the spot market, perpetual contracts, and futures contracts, you can get a clearer perspective on whether professional traders are trending higher or lower.

Even so, there are occasional differences in the methods used between different exchanges, so viewers should watch out for changes rather than absolute numbers.

Proportion of long and short positions of the main traders. Source:

The top Binance traders positioned themselves an average of 23% over the past 30 days and preferred long positions. That wasn’t the case on Jan 7th when they started adding long positions to a high of 59% in the early hours of Jan 10th.

That move came when BTC broke the resistance at $ 37,000 and rose to $ 41,500. Hence, after every BTC price move, the top Binance traders have largely reacted instead of trying to anticipate it.

On the other hand, Huobi’s top traders averaged 0.91 over the past 30 days and preferred short positions around 9%. From January 8th through the wee hours of January 10th, these traders had increased their short positions, so they took their profits when BTC failed to break the $ 42,000 level.

This trend was reversed when BTC lost support at $ 39,000 and Huobi’s top traders reduced their net short positions from 28% to 4% to hit the bottom.

To the last, OKEx’s top traders added long positions and pushed the 1.00 indicator (flat) to a ratio of 1.79 in the early hours of January 8th, favoring long positions in the early morning hours of January 11th.

These traders bought on the roof and were the ones who got heavily liquidated when the price of BTC fell 26%. The ratio of long and short positions hit 1.00 (flat) again, just as BTC hit $ 34,000 on Jan 11th.

Bitfinex traders were also surprised

Bitfinex collects data on the profits and losses of its top traders on a weekly basis, although users may “disapprove” of this ranking. In the past 24 hours, the last 10 have lost a total of $ 153.3 million.

Profits and losses of major Bitfinex traders. Source: Bitfinex

Relevant losses during a surprise drop shouldn’t mean Bitfinex traders got it wrong. Some may have been poorly positioned, but overall they benefited during the rally. Currently, Bitfinex traders have returned to a “neutral” position in line with their historical levels.

Ratio of long and short positions at Bitfinex (blue) to the price of BTC (orange). Source: Bitfinex

The data provided by the exchange shows this The proportion of long and short positions on Bitfinex increased from 2 to 9, which favored long positions between November 25 and December 21.

Put things in perspective The 6-month moving average is 6 and tends to be long. Hence, given their data on the leverage of margin products, these traders were surprisingly profitable.

20% drops are more the norm than the exception

It’s also important to keep in mind that Bitcoin has an average daily volatility of 3.75%. Hence, these large corrections should be expected.

Bitcoin experienced one 50% intraday decline on March 12, 2020, For those patient enough to get through these bearish periods, An eleven-fold rally followed as the cryptocurrency rose from $ 3,600 to nearly $ 42,000.

The views and opinions expressed here are solely those of automobiler 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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