Connect with us

Bitcoin

Bitcoin Forms Higher Lows as Bulls Defend Against Heavy Selling Pressure

Published

on



  • It has been a rocky past few days for Bitcoin and the entire cryptocurrency market
  • After first stabilizing above $12,000 for a multi-day period earlier this week, the crypto recently faced an influx of selling pressure that pushed it back below this level
  • It has now entered what appears to be yet another prolonged consolidation phase in the upper-$11,000 region
  • On a positive note, bulls have been able to establish higher lows, while also guarding multiple key levels
  • This has led analysts to believe that some short-term upside is imminent

Bitcoin is currently caught within a consolidation channel in the upper-$11,000 region. This is around where its price has been trading in the time following its break below $12,000 that took place yesterday morning.

Since then, its price has been oscillating between lows of $11,600 and highs of $11,800, with this potentially marking the new range to watch in the near-term.

Analysts believe that BTC remains in a favorable technical situation for bulls, with its ability to guard against further downside and form a higher low both being positive factors.

Bitcoin Shows Signs of Strength Following Recent Break Below $12,000 

At the time of writing, Bitcoin is trading up marginally at its current price of $11,770. This is around the price at which the crypto has been trading throughout the past few weeks, with it only breaking above $12,000 for a brief period.

This somewhat lackluster price action has done little to offer investors with insight into the cryptocurrency’s near-term trend.

That being said, analysts are confident that Bitcoin’s next movement will favor bulls.

One factor that seems to support this possibility is the fact that Bitcoin has consistently been setting higher lows throughout the past few weeks, as one analyst observed.

“Bears: ‘IT’S OVER!!’ Me: that’s strange, we’re still just making higher lows,” he said in jest while pointing to the below chart.

Image Courtesy of Byzantine General. Chart via TradingView.

Here’s How High BTC May Push After Confirming a Short-Term Bottom

Another analyst echoed this sentiment, explaining that he believes the bottom is in and that Bitcoin could now push towards the region between $12,100 and $12,200.

“BTC – $12.1k – $12.2k. Bottom is in for now imo. Above $12.2k and we go for $12.5k minimum,” he said while pointing to the chart seen below.

Image Courtesy of UB. Chart via TradingView.

How Bitcoin ultimately responds to the trading channel that it is forming within the upper-$11,000 region should offer insight into its near-term outlook.

Featured image from Unsplash.
Charts and pricing data from TradingView.





Source link

Bitcoin

Bitcoin derivatives data shows pro traders ignored today’s $41K pump

Published

on

By


Sometimes all Bitcoin (BTC) needs to pump 10% is a positive remark from someone like Elon Musk.

The Tesla CEO has been pointed to as the culprit for the recent downturn after the company’s May 12 announcement explaining that it would no longer accept Bitcoin payments due to environmental concerns. Musk followed up by saying that he was looking into other cryptocurrencies that required 99% less energy consumption. 

However, on June 13, the situation reversed as Musk reassured the public that Tesla did not sell any additional Bitcoin. The post also said that the electric-car producer would resume taking BTC payments as soon as its Bitcoin mining relied on a minimum of 50% clean energy.

In bear markets, top traders act with caution

While retail investors and algorithmic trading bots jump into action as soon as bullish or bearish signals and news flash, top traders tend to act more with more caution. Those who have been around the crypto markets long enough know that positive news might end up being ignored or severely downplayed in bear markets.

On the other hand, even potentially negative news seems to have little to no impact during bull runs. For example, on Sept. 26, 2020, Kucoin was hacked for $150 million. The following week, on Oct. 1, the United States Commodity Futures Trading Commission charged BitMEX for operating an unregistered trading platform and violating Anti-Money Laundering regulations.

Two weeks later, police reportedly questioned the founder of OKEx, forcing the exchange to suspend crypto withdrawals. Had this series of negative news happened while Bitcoin was flat or in a bearish phase, the price would have undoubtedly have stalled during a bear market.

Bitcoin price at Coinbase in USD, Sept. 2020. Source: TradingView

As shown above, Bitcoin barely had any negative impact in late September and October 2020. In fact, by the end of November 2020, Bitcoin was up 74% in two months. This is the main reason why top traders tend to ignore positive news during bear markets and vice-versa.

The 3-month futures premium is neutral

A futures contract seller will usually demand a price premium to regular spot exchanges. This situation is not exclusive to crypto markets and happens in every derivatives market because in addition to the exchange liquidity risk, the seller is postponing settlement and this results in a higher price.

The 3-month futures premium (basis rate) usually trades at a 5% to 15% annualized premium in healthy markets. When futures are trading below the regular spot exchange price, it signals a short-term bearish sentiment.

Huobi 3-month Bitcoin futures basis. Source: Skew

As shown above, the future basis has been below 11% since May 20 and flirting with bearish territory on multiple occasions as it tested 5%. The current level indicates a neutral position from top traders.

The options skew is no longer signaling fear

The 25% delta skew compares similar call (buy) and put (sell) options side-by-side. It will turn positive when the protective put options premium is higher than similar risk call options.

The opposite holds when market makers are bullish and this causes the 25% delta skew indicator to enter the negative range.

Deribit Bitcoin options 25% delta skew. Source: laevitas.ch

The above chart confirms that top traders, including arbitrage desks and market markers, are currently uncomfortable with Bitcoin price as the neutral-to-bearish put options premium is higher. However, the current 7% positive skew is far from the 20% exaggerated fear seen in late May.

Derivatives markets show no evidence of top traders getting excited about the recent $40,000 hike. On the bright side, there is room for leverage buyers to mount positions. Stronger upswings usually occur when investors are least expecting, and the current scenario seems to be a perfect example.

The views and opinions expressed here 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.