The price of Bitcoin (BTC) has been struggling to hold the $ 47,500 support since the December 4 crash., a move that killed more than $ 840 million in leveraged long futures contracts. The downward movement came after the emergence of the Omicron variant of the Coronavirus and recent data showing that US inflation has reached a 40-year high..
While newcomers may have been spooked by the 26% price correction in the past month, whales and avid investors, such as MicroStrategy, increased their positions. On December 9, MicroStrategy announced that it had acquired 1,434 Bitcoin, increasing its stake to 122,478 BTC.
According to some analysts, the reason for Bitcoin’s price weakness was fear of the risk that Evergrande, a major Chinese property developer, defaulted on its US dollar debt on December 9. The expiration of the Bitcoin options for 1.1 billion dollars on December 10 also could have played a big factor because the bears made a profit of $ 300 million.
Margin traders remain extremely bullish
Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrencies. When these skilled traders borrow Bitcoin, they use the coins as collateral for the shorts, which means they are betting on a decline in price.
Thus, Some analysts monitor the total amounts of Bitcoin and stablecoin loans to see if investors are trending up or down.. Interestingly, Bitfinex margin traders cut their long positions slightly ahead of the December 4 price drop.
Note that the indicator remained at a decent 90% in favor of longs, which means that stablecoin loans were only 10% of Bitfinex’s total. What’s more, Margin longs rallied 94% less than 24 hours after the price drop. This suggests that although these investors were taken by surprise, most held their positions during the move.
To confirm whether this movement was specific to the instrument, one must also analyze the options markets. 25% delta skew compares similar call and put options. The indicator will turn positive when “fear” prevails, as the protection premium for put options is higher than that for call options of similar risk.
The opposite happens when market makers are bullish causing the 25% delta skew to shift into the negative zone. Readings between negative 8% and positive 8% are generally considered neutral.
25% delta skew hovered near 6% before Bitcoin price crash December 4, which is considered neutral. Over the next 3 days, options market makers and whales showed moderate fear as the indicator peaked at 10%, but currently stands at 3%.
Bitfinex Long Margin Metric and Options Main Risk Metric Show Few Signs of Stress in Derivatives Markets. Considering that these markets are more used by professional traders, you can start to believe the narrative that Bitcoin will claim a new all-time high in early 2022.
Points of view and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should carry out your own research when making a decision.
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