Bitcoin (BTC) showed strength on March 22, posting a 5% gain and testing the $43,000 resistance. The move liquidated more than $150 million in leveraged short positions, those that bet on a declining price using futures contracts.
Some Twitter analysts attribute the price improvement to Do Kwon, the co-founder of the Terra blockchain protocol. During a recent conversation on Twitter Spaces with analyst Udi Wertheimer, Kwon revealed his plans to back the TerraUSD stablecoin with Bitcoin.
The Terra co-founder said that “the current clip that we have to buy Bitcoin is about $3 billion and it will add to that”causing markets to stir on March 21 when some observers attributed a $125 million Tether (USDT) transaction to Kwon.
Margin traders are still long
Margin trading allows investors to borrow cryptocurrency to leverage their trading position, increasing returns. For example, one can buy cryptocurrencies by borrowing Tether and increasing their exposure.
On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price falling. Unlike futures contracts, the balance between the longs and shorts of the margin is not always even.
The chart above shows that traders have been borrowing more BTC recently as the ratio dropped from 15 on March 20 to 7.5 today. Although the data remains bullish as the indicator favors stablecoin lending, it hit the lowest level since March 9. Considering that crypto traders are usually bullish, a margin lending ratio of less than 3 is considered unfavorable. Therefore, the current level is still positive, just less confident than two days ago.
Options markets haven’t moved recently
Currently, it is somewhat difficult to discern a direction in the market. However, the 25% delta slope is a telltale sign whenever arbitrage desks and market makers overcharge for upside or downside protection. The 25% delta slope compares similar call and put options. The metric will turn positive when fear prevails because the premium for protective put options is higher than for similarly risky call options.
The deviation indicator will move above 8% if traders fear a drop in Bitcoin price. On the other hand, the general excitement reflects a negative tilt of 8%.
As shown above, we came out of the 8% “fear” mode on March 9 and entered a neutral zone since then. However, Tuesday’s 5% rally was not enough to change the options’ bias from neutral to bullish.
Despite the not-so-positive Bitcoin options indicator, these arbitrage desks and market makers will be forced to reverse bearish positions once the price breaks $45,000 and changes the current trend.
The Margin Loan Ratio OKX showed that professional traders reduced their bullish bets after a 13% BTC price rally in 10 days, so the derivatives data provides a slightly bearish view. For this reason, waiting for a rally above $43,000 right now seems overly optimistic.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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