3 Bitcoin price metrics show bulls were not intimidated by today’s $ 1.6B settlement


The $ 11,500 sudden drop in Bitcoin (BTC) liquidated more than $ 1.64 billion in BTC futures contracts. This gigantic figure represents 8.5% of the total of US $ 19.5 billion in open interest, which coincidentally had just reached its historic maximum.

While these numbers are significant, they are proportionately less than the $ 1 billion futures settlement on November 26, 2020. At that time, the 16% correction that followed the Bitcoin price test with a US low $ 16,300 reduced open interest by 17%.

In light of today’s big price movement, investors’ positive expectations for Bitcoin remain unperturbed, as both the rate of financing future contracts and the slope of the 25% delta of options are not signaling any red flags.

Open interest fell 8%

Bitcoin futures add open contracts. Source: Bybt.com

As the chart above shows, negative price swings and reductions in open positions of BTC futures do not affect Bitcoin’s long-term growth. Between January 19 and 23, the indicator fell 20%, but it took only two weeks to recover to the level of US $ 13 billion.

The number of open interest contracts will vary more aggressively when traders are using excessive leverage. When this occurs, normal price fluctuations will cause cascading settlements, reducing the number of open interest contracts.

Contango remained stable, indicating a healthy market

By measuring the premium on futures contracts in relation to the current spot levels, it can be inferred whether professional traders are inclined upwards or downwards. Usually, markets have a slightly positive annualized rate, a situation known as “contango”.

Bitcoin Futures Awards annualized on March 26 -. Source: NYDIG

Although the premium fell after touching 5.7% on February 17, it has since dropped to 3.5%, which is the average. Considering that there are 31 days until the contract expires on March 26, this translates into an extremely high annualized rate of 50%.

As previously reported by Cointelegraph, the rate of financing perpetual contracts has exceeded 2.5% per week. Therefore, the arbitration desks are probably paying a big premium on March contracts to profit from the fee difference.

The 25% delta slope of the options market remains optimistic

The 25% delta skew measures how neutral to high call options are priced in relation to equivalent low put options.

Bitcoin options 25% delta skew for 3 months. Source: Laevitas

The indicator acts as a measure of fear and ambition for option traders, and is currently at -6%, which means that protection for the positive side is more expensive. This further confirms the absence of despair on the part of market makers and leading traders.

Main indicators continue to favor bulls

Today’s price movement may be surprising to new market participants, but those who remember when the price of Bitcoin fell $ 11,200 between January 10 and 11 will know that these sudden movements cannot be considered out of the ordinary, especially considering Bitcoin’s six-day volatility at 5.1%.

The data suggests that traders who buy today’s drop are likely to come out on top. Bitcoin’s positive news flow and the growing interest of institutional investors in BTC are likely to intensify after the $ 48,000 retest.

The views and opinions expressed here are exclusively those of author and do not necessarily reflect the views of the Cointelegraph. Every investment and trading movement involves risk. You must conduct your own research when making a decision.

Read more:




mm

Thomas Miles

Cryptocurrency is the most recently discovered currency which will be likely at the help of modernization across the next few decades. With a limited control from the government, the crypto market is independent of many features of a sound market as we know it. Thomas brings these stories to us by weaving them into articles of general importance to all those looking at the fluctuations in the market, or new entries. Thomas is also the founder of Bulletin Bits and is an excellent leader. His leadership is the kind that makes him the most knowledgeable and experienced on the team. His wonderful work ethic and attitude are worthy of imitation!

Leave a Reply

Your email address will not be published. Required fields are marked *