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Bitcoin’s Price is Failing to Convince the Margin Markets That It is Bullish

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  • Bitcoin has been caught within a firm uptrend that has allowed it to shatter its correlation with the stock market as it continues marching higher
  • Despite the overt bullishness of this move, funding rates have been on the brink of being negative on many major trading platforms
  • This shows that demand for short positions remains high, and that traders are widely trying to time its top
  • Furthermore, this trend is observed while looking towards Bitcoin’s long versus short ratio on major exchanges
  • This means that Bitcoin could continue rallying, using these short positions as fuel for a strong move higher

Bitcoin and the entire crypto market have been caught in the throes of a sideways trading bout throughout the past couple of days.

BTC has been unable to shatter the heavy resistance that sits just above its current price, with buyers and sellers both being unable to gain any serious control over its near-term outlook.

However, its mid-term market structure remains highly bullish, which could indicate that further upside is imminent in the coming few days.

For this potential rally to come to fruition, bulls must break the heavy resistance in the lower-$13,000 region.

One trader believes that a growing number of short positions could act as rocket fuel for the next move higher.

Bitcoin Struggles to Break Key Resistance as Consolidation Phase Persists 

At the time of writing, Bitcoin is trading down marginally at its current price of $12,950. This is around where it has been trading throughout the past few days.

If it cannot surmount the resistance between $13,11 and $13,500, it may continue seeing stagnating growth in the near-term.

A break above this region would put a move to significantly higher highs on the table.

Analyst: Growing Number of Short Positions to Bolster BTC

While sharing his thoughts on Bitcoin’s near-term outlook, one analyst explained that Bitcoin’s market structure is overtly bullish, but the composition of long and short positions doesn’t reflect this.

He contends that this could mean there is serious room for further upside.

“I realized just now that there is a strong case to be made that we continue going parabolic a bit longer. Price is higher than during the previous range (July-August), yet the market isn’t nearly as overly bullish as then… Price is higher, yet the market isn’t as bullish.”

Image Courtesy of Byzantine General.

Which direction Bitcoin will trend throughout the rest of the year will likely grow clear in the coming few days, as it is currently trading near a pivotal level.

Featured image from Unsplash.
BTCUSD pricing data from TradingView.





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

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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.