Bitcoin

These 4 most important Bitcoin price metrics clearly reflect the optimism of traders

When the price of Bitcoin (BTC) tested the low of $ 17,580 on December 11th, investors remained relatively calm, despite some analysts issuing bearish estimates. Last week’s trading may have ended at where they started, but Bitcoin’s fundamentals have gotten even stronger.

BTC / USD 4 hour chart. Source: TradingView

Every time Bitcoin hits a new high, investors expect a correction. Although it failed to break the $ 24,000 resistance, the price quickly rebounded from falling below $ 22,000 on December 21st. This event may have given sellers hope, but under the hood there is not a single sign of weakness.

Last week, Bitcoin’s dominance continued to grow, increasing from 64.3% to 67.3%. That move was aided by the prediction of a price of $ 46,000 by 2021 by Dubai-based financial advisory firm deVere Group. additionally The Chicago Mercantile Exchange (CME) exceeded $ 1.3 billion in futures contracts. This creates undeniable evidence of growing institutional involvement in the BTC markets.

These 4 most important Bitcoin price metrics clearly reflect the optimism of traders
These 4 most important Bitcoin price metrics clearly reflect the optimism of traders

This news seems to have given investors more confidence. This caused Bitcoin to hit a new all-time high of $ 24,300 on December 20th.

Weekly performance of the top 16 cryptocurrencies. Source: Nomics CoinMarketCap

Last week, Bitcoin outperformed the top 15 altcoins, which rose 7.7% on average. More importantly, the volume of altcoins was disappointing compared to Bitcoin’s 50% increase. This indicator bolsters the recent performance of the dominance rate, as does BTC setting the $ 22,500 level as new support.

Institutional investors are hoarding as Bitcoin price consolidates

The cryptocurrency fund manager, Grayscale Investments has continued to aggressively add BTC to its portfolio. which now contains $ 13.3 billion worth of Bitcoin.

Grayscale Investments’ BTC holdings. Source: bybt.com

Over the past week, 11,620 BTC has been added for a total of 576,650 BTC. So it was another great week for Grayscales Bitcoin Trust. Similar enthusiasm emerges when analyzing the fund’s premium over BTC that each stock has. This premium is currently 0.00095064 BTC.

Grayscale Bitcoin Trust Reward. Source: TradingView and Grayscale

As can be seen in the previous graphic, The premium rose from 18% to 40% in the last seven days. This exceptional level can be partly explained by a temporary suspension of the issue of new shares.

Although a bit unusual, a similar movement occurred six months ago. By discontinuing supply to institutional customers, any additional demand must be met by secondary sales, which creates pressure for a higher premium.

The financing rate of perpetual futures remains stable

Perpetual contracts, also known as reverse swaps, have an implicit rate that is usually calculated every eight hours. The funding rates guarantee that there are no currency risk imbalances. While the open interest of buyers and sellers is consistently the same, leverage can vary.

When buyers (long position holders) demand more leverage, the funding rate becomes positive. Hence, the buyers are the ones who pay the commissions or fees. This problem is especially true in bullish cycles, where more long positions are generally in demand.

Sustained rates above 2% per week lead to extreme optimism. This level is acceptable during market rallies but problematic when BTC price is moving sideways or in a downtrend.

In such situations, high leverage by buyers increases the likelihood of cascading sell-offs when the price drops sharply.

Financing rates for perpetual BTC futures. Source: Digital asset data

See how, despite Bitcoin’s weakness on December 21st The weekly funding rate was able to avoid a negative area. This data shows that both short traders (sellers) and long traders (buyers) use roughly the same leverage.

This is a neutral reading Both sides have plenty of gunpowder to raise their stakes.

Social media activity was at its peak

BTC-related activity by Twitter users compared to USD price. Source: The tie

The data from The tie they show that too The recent price surge for BTC was due to tweets related to ‘Bitcoin’ reaching their highest level since December 2017. Despite the recent correction in the social media activity indicator, the current level is still 10% above the previous month.

While a sharp spike in Twitter activity doesn’t necessarily mean a hefty retail buy, it certainly does help attract more attention as the cryptocurrency continues its upward trend.

Option sales / purchase relationship

The best way to determine general market sentiment is to measure whether there is more activity in call options or put options. In general, call options are used in bullish strategies while put options are used in bearish strategies.

A sell / buy ratio of 0.70 shows that the open interest of put options is 30% behind the most bullish call options and therefore market sentiment will be bullish.

An indicator of 1.20 that favors put options by 20%, can be seen as a bearish feeling. Note that the metric aggregates the entire BTC options market including all calendar months.

Sell ​​/ buy ratio of BTC options. Source: Cryptorank.io

When the price of Bitcoin passed the $ 20,000 mark, investors quickly sought protection on the downside. As a result, the sell / buy ratio hit a high of 1.08 on December 19. The very unusual level that favored the more bearish neutral strategies was reversed shortly afterwards when the indicator returned to 0.60.

This shows that investor optimism was not affected by the 10% price correction after the all-time high of $ 24,200.

Bitcoin is trading at $ 22,500 while traders remain bullish

Mostly, Each of the indicators discussed above quickly bounced back into neutral to bullish territory, and that’s relatively positive as the market recently tested a low of $ 21,910.

With BTC holding over $ 22,500, investors are quickly regaining their confidence. while the constant daily jumps are a positive sign.

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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