Bitcoin (BTC) showed its strength on Oct 4-5, posting a 5% gain on Oct 5 and breaking through the $20,000 resistance.. The move liquidated $75 million of leveraged short (bearish) positions and led some traders to predict a potential rally to $28,000.
Shared this descending channel 2 days ago.$BTC you have managed to break through the middle line.
Next target = Upper channel trendline = ~21.5k.In case of a breakout, 28k-30k are possible. pic.twitter.com/dyqMLdcXZ4
— ⓗ (@el_crypto_prof) October 4, 2022
$BTC #Bitcoin
We shared this descending channel 2 days ago. $BTC has managed to break the middle line.
Next Target = Upper Channel Trend Line = ~21.5k.In the event of a break, 28k-30k are possible.
As @el_crypto_prof describes, the descending channel is still exerting its pressure, but there could be enough strength to test the upper channel trend line at $21,500. LPrice action coincided with improving conditions in global stock markets on October 4, as the S&P 500 index gained 3.1% and the tech-heavy Nasdaq Composite rose 3.3%.
Interestingly, the improving sentiment came as US job openings fell by 1.1 million in August, according to the US Department of Labor. The decline was the largest since April 2020 and signaled that the US Federal Reserve’s aggressive contractionary monetary policy could end sooner than expected.
The overall bullish sentiment might have seen Bitcoin break the $20,000 resistance, but that doesn’t mean professional investors are comfortable at current price levels.
Margin traders did not add to their long positions despite rally
Tracking the margin and options markets provides excellent insight into how professional traders position themselves. Margin trading allows investors to borrow cryptocurrency to leverage their trading position. For example, exposure can be increased by borrowing stablecoins to buy an additional Bitcoin position.
On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price falling. Nevertheless, Unlike futures contracts, the balance between long and short margin positions does not always coincide.
The chart above shows that OKX traders’ margin lending ratio has been relatively stable, around 12. At the same time, Bitcoin price is up 5% since October 3rd. Additionally, the metric remains bullish favoring stablecoin lending by a wide margin. As a result, professional traders have held bullish positions.
Options markets remain neutral
To understand whether Bitcoin will be able to hold the $20,000 support, the 25% delta bias is a telltale sign when arbitrage desks and market makers are overcharging for bullish or bearish protection.
The indicator compares similar call and put options and turns positive when fear prevails because the protection premium of put options is higher than that of risk options.
The slope indicator will move above 12% if traders fear a drop in Bitcoin price. On the other hand, the general excitement reflects a negative tilt of 12%.
As shown above, the 25% delta slope has been above 12% since September 21. It dipped below that threshold on Oct. 3, suggesting that options traders are pricing in a similar risk of unexpected highs or lows.
Whenever this metric is above 12%, it indicates that traders are fearful and reflects a lack of interest in offering downside protection.
Despite the neutral indicator of Bitcoin options, OKX Margin Lending Index showed that traders and market makers kept their bullish bets following BTC price increase by 5% on Oct 4.
Derivatives seem to reflect that confidence in the $20,000 support is gaining strength as investors show an increased likelihood that the US Federal Reserve will ease interest rate hikes sooner than expected.
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