Bitcoin Derivatives Data Reflects Mixed Sentiments From Traders Below $17,000

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bitcoin (BTC) fell 25.4% in 48 hours, hitting $15,590 on Nov. 9 as investors rushed to exit positions after the second-largest cryptocurrency exchange, FTX, discontinued withdrawals. More importantly, the levels below $17,000 were last seen almost two years ago, and fear of contagion became evident.

The move liquidated $285 million in leveraged long (bullish) positions, leading some traders to predict a potential drop of $13,800.

As described by independent market analyst Jaydee_757, the downtrend continues to exert pressure, with $17,200 as the resistance level. Still, such an analysis does not guarantee that the ultimate low of $13,800 will be reached.

Curiously, the price action coincided with improving global equity market conditions on Oct. 4, with the S&P 500 index gaining 6.4% between Nov. 10 and Nov. 11 and the high-component Nasdaq Composite technology, up 9.5%. So, at least from a technical perspective, Bitcoin has completely decoupled from traditional finance.

Further uncertainty over Bitcoin was caused by shares of Grayscale Bitcoin Trust trading on the OTC exchanges after the $11.4 billion discount on its assets exceeded 40%.

As noted by Vance Spencer, the implicit price of BTC based on fund transactions is below $9,000, and the pressure is likely to continue if some holders use their shares as collateral for loans.

Still, the negative sentiment that took Bitcoin below $20,000 does not mean professional investors are bearish at current price levels.

Margin traders failed to close their longs

Margin and options market monitoring provides great insight into the position of professional traders, allowing investors to borrow cryptocurrency to leverage their trading position.

For example, one can increase exposure by borrowing stablecoins to buy an additional bitcoin position. On the other hand, Bitcoin borrowers can only sell the cryptocurrency because they are betting on its price falling. Unlike futures contracts, the balance between long and short margins is not always equal.

OKX USDT/BTC margin lending ratio. Source: OKX

The chart above shows that OKX’s margin lending ratio for traders increased from November 8-10, signaling that traders failed to close their long levers despite the 25.4% price correction.

Furthermore, the metric continues to favor stable borrowing with a wide margin, indicating that traders have maintained bullish positions.

Options markets tumbled lower

Traders need to analyze the options markets to understand if Bitcoin can recover the $18,500 support. The 25% delta skew is a telltale sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

The indicator compares similar call (call) and put (sell) options and turns positive when fear prevails, because the protection premium of put options is higher than that of risky call options.

The bias indicator will move above 10% if traders fear a Bitcoin price crash. In contrast, generalized excitement reflects a negative bias of 10%.

Bitcoin options 60 days 25% delta skew: Source: Laevitas

As noted above, the 25% delta skew had been below 10% since Oct. 26, but quickly breached that threshold on Nov. 8, suggesting options traders were pricing in higher risk from downside declines. unexpected prices.

Anytime this metric goes above 10%, it signals traders are scared and reflects a lack of interest in offering downside protection.

Related: Crypto.com’s CRO is struggling, but a 50% price rebound is in play

The dismissal of the FUD does not happen overnight

Despite the bearish Bitcoin options indicator, OKX’s margin lending rate showed whales and market makers holding bullish bets. Fear of contagion could explain the mixed sentiment as investors struggle to interpret recent moves on the Crypto.com exchange, including an “accidental” transfer of 320,000 ether (ETH) to Gate.io.

Analyst Holger Zschaepitz’s post describes current investor sentiment as being risk averse on centralized exchanges offering products and services similar to the now bankrupt FTX.

Therefore, the derivatives reflect low confidence in the recovery of the $18,500 support until more data shows that liquidity in the cryptocurrency ecosystem has been restored.

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 conduct your own research when making a decision.


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