“Don’t go against the trend” is an old saying in the markets, and there are other variants of the phrase such as “never catch a knife while it falls”. The bottom line is that traders should not try to anticipate trend changes, or worse, try to improve their average price while losing money.
It doesn’t really matter if someone trade soy, silver, stocks, or crypto futures. Markets generally move in cycles, which can last from days to years. In the case of Bitcoin ( BTC ), it is difficult for anyone to justify a bullish case by looking at the chart below.
In the last 25 days, all attempts to break out of the descending channel have been abruptly interrupted. Interestingly, the trend points to a level below $ 40,000 by mid-October, which results be the deadline for the decision of the United States Securities and Exchange Commission on the ProShares Bitcoin ETF (October 18) and Invesco Bitcoin (October 19).
According to CoinShares weekly report , recent price action prompted institutional investors to enter the sixth consecutive week of inflows. Between September 20 and 24, entries amounting to almost USD 100 million were registered.
More experienced traders claim that Bitcoin needs to recover the support at $ 43,600 for the uptrend to resume. Meanwhile, the on-chain data points to a large build-up, given that the falling supply of BTC available on exchanges has been the dominant trend.
Perpetual futures show that traders are between neutral and bearish
To evaluate investor sentiment, the financing rate of perpetual contracts must be analyzed, since they are the preferred instruments for retail traders. A Unlike monthly contracts, perpetual futures (reverse swaps) trade at a very similar price to regular spot exchanges.
The financing rate n is automatically charged every eight hours to longs (buyers) when they are the party that requires more leverage. However, when the situation is the opposite, and shorts (sellers) demand more leverage, the rate of financing becomes negative, and they are the ones who will pay said fee.
A “neutral” situation implies that leveraged longs pay a small rate, ranging between 0% and 0.03% per 8-hour period, which is equivalent to 0.6% per week. Even so, the chart above shows a slightly downward trend since September 13, when the funding rate was last seen above the 0.03% threshold.
The share of put and call options favors the bulls, but the trend has changed
Unlike futures contracts, options are divided into two segments. Call options allow the buyer to purchase Bitcoin at a fixed price on the expiration date. They are generally used in neutral arbitrage operations or bullish strategies.
For their part, put options are commonly used as protection against negative price fluctuations.
To understand how these forces are balanced, there is to compare the open interest of the call and put options.
The indicator hit a low of 0.47 on August 29, reflecting the 50,000 BTC protective put options stacked against the 104,000 BTC call options. Still thus, the gap has been decreasing as the use of neutral to bearish sales contracts began to gain momentum after the monthly expiration of September 24.
According to the derivatives market For Bitcoin, it might seem rushed to speak of a “bearish” period, but the last two weeks show absolutely no bullish signs on derivatives indicators. It seems that the hope of the bulls is clinging to the ETF deadline, which acts as a trigger to break the current market structure.
The views and opinions expressed here are solely those of Author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must carry out your own research when making a decision.
Keep reading:
- According to the president of Colombia Fintech, the projections for the price of bitcoin are positive
- Bloomberg expert predicts that Bitcoin ETFs could get US go-ahead in October
- This is a way to trade BTC while the price of Bitcoin staggers into the abyss
- Cryptocurrency options are getting popular
- This is how professionals trade Bitcoin safely while fluctuating in a range close to $ 40,000
- A presentation from BlackRock to the US SEC shows that the company made $ 369,000 on Bitcoin futures
Much barking and little bite: China’s Bitcoin ban puts traders in the “fear” zone
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