In the past 24 hours, Bitcoin (BTC) has dropped 14% and tested the $ 32,000 support for the fifth time so far in 2021. Merchants may become more anxious when The price dropped to $ 31,050, But as of this writing, the 4 hour chart indicates that the sell-off may be slowing.
For now, the short-term charts indicate that Bitcoin is still flirting with bearish territory, however A number of derivative and major traders’ flow indicators reflect levels between neutral and bullish.
In the last three times the Bitcoin price has fallen below $ 32,000, we have seen a prolonged spike of up to 30%. The data shows that the main traders are in OKEx They have been buying hard the lower and the futures premium remains in an optimistic range.
4 hour chart BTC / USD. Source: TradingView
Although traders are buying the current decline, the strong correction to $ 4,200 has caused heavy damage to some investors. The drop to $ 31,270 was followed by derivative exchange settlements of $ 460 million. Interestingly, this just happened when open interest in Bitcoin futures reached an all-time high of $ 13.1 billion.
Opening an interest in bitcoin futures contracts on derivative exchanges. Source: Bybt.com
Today’s price action may look worrying, But it pales in comparison to the 24% decline on January 10 that swept $ 1.5 billion in long contracts.
Veteran traders are more familiar with the annual Bitcoin fluctuation of 120%. So a 12% price fluctuation isn’t particularly scary. In fact, the top traders and the arbitrage teams were relatively quiet on the slide.
To understand whether Bitcoin is showing bearish signals or not, traders can analyze The ratio of long and short positions of major traders on cryptocurrency exchanges, futures premium and options bias.
OKEx long positions outperform the shorts
The data provided by the exchange highlights the net positions between the long and short positions of the traders. By analyzing each client’s position in the spot market, and permanent and future contracts, a trader can get a clearer perspective on whether professional traders are trending higher or lower.
However, there are occasional differences in methodologies between the various exchanges. So viewers should watch for changes rather than absolute numbers.
The ratio of long and short BTC positions to major traders. Source: Bybt.com
OKEx major traders have been adding longs since January 19, pushing the 0.96 index (slightly net short trade) to 2.49. Which prefers long centers. This is the highest in 30 days and indicates an unusually severe imbalance.
On the other hand, Huobi top traders have averaged 0.91 between buy and sell over the past 30 days, preferring to sell 9%. On January 20, they added short positions to the 0.86 ratio, but bought it again when BTC fell during the early hours of January 21. Therefore, they returned to their monthly average of 0.91 for long and short positions.
finally, Binance’s top traders have achieved an average of 21% prefer long positions over the past 30 days. These traders appear to be liquidating as their positions fell to 1.02 from 1.18 since the end of January 20th. According to Coinalyze data, 40% of all liquidations of BTC long positions occurred in the past 24 hours on Binance.
Futures premiums rose
Professional traders tend to dominate long-term futures contracts with fixed expiration dates. By assessing the spending gap between the futures contract and the regular spot market, a trader can determine the level of an uptrend in the market.
3-month futures contracts should generally be traded at a (base) annual premium of 6% to 20% compared to regular spot exchanges. Every time this indicator disappears or turns negative, it is a red flag. This situation is known as Lagged It indicates that the market is trending downward.
On the other hand, A sustainable base of over 20% indicates excessive leverage by buyers, creating the potential for cascade liquidations and eventual market recessions.
March 2021 BTC Futures Bonus. Source: NYDIG Digital Asset Data
The diagram above illustrates this The index has ranged between 3.5% and 5.5% since December 13th, which translates into a moderate bullish annual base of 19%. Meanwhile, the latest peak of 6.5% equates to a 29% annual premium, indicating increased leverage on the part of buyers.
Although this is not the exact reason for today’s correction, market makers and arbitration bureaus know exactly how to explain this situation. The drop in price is sure to trigger a lot of sell-off, and it should also be noted that open interest in the futures contract has just reached its all-time high.
Currently, the March bitcoin contract premium has stabilized at around 2.5%. Equivalent to 14% healthy annual base.
20% drops are the rule, not the exception
It is important to consider this Bitcoin’s 60-day volatility is 4.2%. Therefore, these significant corrections should be expected.
Bitcoin saw a 20% drop and tested levels below $ 28,000 on Jan 4th. This was followed by Prof. 27% intraday drop on January 11th. For those brave enough to purchase all of these falls, A 30% recovery occurred in less than four days after that.
The opinions and opinions expressed herein are solely of those of automatics They do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risks, you must do your research when making a decision.
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