Bitcoin (BTC) showed weakness on August 15, posting a 5% loss after testing the $25,000 resistance. The move liquidated over $150 million of leveraged long positions and has led some traders to predict a pullback to the yearly low in the $18,000 range.
The price action coincided with worsening conditions for tech stocks, including Chinese giant Tencent, which is expected to post its first-ever quarterly revenue decline. According to analysts, the Chinese gaming and social media conglomerate is expected to post quarterly profit of about $19.5 billion, down 4% from a year earlier.
Also, On August 16, investment bank Citi cut Zoom Video Communications (ZM)’s recommendation to sale, adding that the stock is “high risk.”. Analysts explained that difficult post-COVID dynamics, plus additional competition from Microsoft Teams, could lead to a 20% drop in ZM shares.
The general bearish sentiment continues to plague crypto investors, a move outlined by influencer and trader @ChrisBTCbull, who mentioned that a simple rejection of $25,000 caused traders to post targets below $17,000.
despues de #bitcoin didn’t break price through $25000, all CT started writing about the price again $16k-17k
I think it’s time to open long#trading
— Chris (@ChrisBTCbull) August 16, 2022
After Bitcoin failed to break the price above $25,000, all the CTs started targeting the price again at $16,000-17,000.
I think it’s time to go long
Margin traders remain bullish despite rejection of the $25,000 level
Tracking the margin and options markets provides excellent insight into how professional traders position themselves. For example, a negative reading would ensue if traders and market makers reduced their exposure as BTC neared the $25,000 resistance.
Margin trading allows investors to borrow a cryptocurrency to leverage their trading position, increasing returns. For example, exposure can be increased by borrowing stablecoins to buy an additional Bitcoin position.
Secondly, Bitcoin borrowers can only short the cryptocurrency as they bet on its price falling. Unlike futures contracts, the balance between long and short spreads is not always even.
The chart above shows that OKX traders’ margin lending ratio has been relatively stable near 14 while Bitcoin price jumped 6.3% in 2 days only to be turned down after hitting the $25,200 resistance.
Additionally, the metric remains bullish favoring stablecoin lending by a wide margin. As a result, professional traders have maintained their bullish positions, and no additional bearish margin trades have emerged as Bitcoin retreated 5.5% on Aug 16.
Options markets remain neutral
It is not known if Bitcoin will run towards the $25,000 resistance again, but the 25% delta bias is a telltale sign when arbitrage desks and market makers overcharge for bullish or bearish protection.
The indicator compares similar calls and puts and turns positive when fear prevails because the premium for protective puts is higher than for risky calls.
The slope indicator will move above 10% if traders fear a drop in the price of Bitcoin. On the other hand, generalized arousal reflects a 10% negative tilt.
As shown above, the 25% delta slope has hardly moved since August 11, hovering between 5% and 7% most of the time.. This range is considered neutral because option traders are pricing in a similar risk of unexpected highs or lows.
If option traders entered into a “fear” sentiment, this metric would have moved above 10%, reflecting a lack of interest in offering downside protection.
Despite the neutral Bitcoin options indicator, OKX margin lending rate showed whales and market makers keeping their bullish bets after a 5.5% BTC price drop on Aug 16. For this reason, investors should expect another retest of the $25,000 resistance as soon as global macro conditions improve.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. All investment and commercial movement involves risk. You should do your own research when making a decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.