Market enters a ‘wait-and-see phase’ as Bitcoin struggles below $40,000

May 27, 2021 Coin Telegraph

<div>Market enters a 'wait-and-see phase' as Bitcoin struggles below ,000</div>

Analysis

Traders remain cautious following last week’s brutal sell-off, but on-chain data is beginning to signal increasingly bullish activity while the crypto market awaits the next major move.

Price action for Bitcoin (BTC) and the wider cryptocurrency market was relatively subdued on May 27 as nervous traders remain unsure of what comes next following last week’s market plunge that saw leveraged traders wiped out as BTC dipped as low as $30,000 before its price rebounded.

Data from Cointelegraph Markets Pro and TradingView shows that while Bitcoin's price has managed to put in higher highs and higher lows over the past week, bulls continue to face stiff resistance at any meaningful attempt to break above $40,000 as bears defend the psychologically important level.

*BTC/USDT 4-hour chart. Source:* *TradingView*

For many traders, the recent correction likely triggered PTSD-like flashbacks of the market crash of 2017 and 2018 and the ensuing two-year crypto winter, and this could be a reason why the market seems indecisive at the moment.

Given that many traders are unsure of what might come next for Bitcoin's price, it's wise to consider the various bullish and bearish scenarios that could play out and to also take stock of the opinions of analysts in the sector.

Traders remain cautious after the recent sell-off

According to David Lifchitz, managing partner and chief investment officer at ExoAlpha, it's important to look closely at the recent market events and review the catalysts that created the current situation.

Lifchitz told Cointelegraph that following an “almost uninterrupted bull run from $10,000 in October 2020 to an all-time high for BTC at $65,000 in mid-April 2021,” the market saw several waves of profit-taking ahead of the “great deleveraging of 2021,” which saw the price of BTC fall by 54% to $30,000, while Ether (ETH) and altcoins were hit even harder.

According to Lifchitz, the correction succeeded in "drastically reducing the amount of leverage that prevailed in the ecosystem," which can be seen as a healthy development for the overall market, as it will help "to build on a more stable base."

*Estimated leverage ratio for Bitcoin. Source:* *CryptoQuant*

Lifchitz cautioned that while data shows that some early dip-buyers managed to pick up tokens near the lows, both volumes and futures open interest have remained weak, “showing no urgency to reload."

The monthly options expiration for Bitcoin and Ether are less than 24 hours away, and Lifchitz believes they are standing in the way of “any meaningful move in the very short term.” He also suggested that it will be “difficult to convince burned investors to get back in the game just now” due to a lack of upside catalyst and the recent reminder that “prices do not always go up.”

This has put the market in a “wait-and-see phase,” according to Lifchitz, with both trend followers and contrarian investors needing “to see some motion, either up or down” before they engage in the market.

Lifchitz said:

“The market definitely needs a catalyst, either upward or downward to move ahead. A too long period without any catalyst could lead to investors fatigue who might decide to cash out and seek other pastures, which would act as gravity on cryptos triggering a downward move. The next few days/weeks will be very telling of what to expect next."

Bullish indicators abound

While the average crypto trader is currently in a state of stasis and awaiting the next major market move to signal what BTC might do next, on-chain data indicates bullish moves from larger players who took full advantage of the recent dip by buying.

According to Micah Spruill, managing partner and chief investment officer at S2F Capital, most of the selling that was seen at the recent lows “has been from newer entrants to the market” who have “been selling at a loss and seem to be exhausted at this point.”

In a conversation with Cointelegraph, Spruill pointed to BTC net transfer volume, which shows that following the bearish downturn between May 17 and 20, “Massive amounts of USDC and USDT have been sent to exchanges (to buy BTC, ETH, etc.) and pull them off to long term storage.”

*BTC net transfer volume to/from all exchanges. Source:* *Glassnode*

Further analysis shows that retail wallets holding between 0.1 and 1 BTC, as well as whale wallets holding between 1,000 and 10,000 BTC, have been accumulating at these levels in preparation for an overall move higher.

Another bullish indicator mentioned by Spruill is entities' net growth, which "is recovering back to prior levels” and may signal that “the bull market is back in full force” if this trend continues over the next few weeks and the metric resumes its highs.

*Entities net growth for Bitcoin. Source:* *Glassnode*

Overall, Spruill sees a positive move for BTC in the future, although the timing is questionable due to a variety of factors.

Spruill said:

“I think there's a possibility we could spend an extended period of time (months) between the $30,000 to $42,000 level as the market digests recent events and we endure a mid-cycle re-accumulation period. Alternatively, it's possible we have a COVID-like recovery whereby we see Bitcoin break outside this range soon and recover much faster than others are expecting.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

$2.2 Billion Notional in BTC Options Set to Expire on Friday, Bitcoin Contango Has Returned

May 27, 2021 Bitcoin.com

Monthly $1.9B Ethereum futures and options expiry will determine if ETH hits $3K soon

May 27, 2021 Coin Telegraph

Monthly .9B Ethereum futures and options expiry will determine if ETH hits K soon

Coin Telegraph

Ethereum bulls may have flipped $2,400 back to support, but Friday’s ETH options and futures expiry will determine if traders press the pedal for $3,000.

The May 28 futures and options expiry could be a turning point for Ether (ETH) as the cryptocurrency rebounded 60% from its $1,730 low on May 23. Even though the open interest stands at $6.2 billion, only 16% is set to expire on Friday as most of the action takes place on perpetual and June contracts.

One must account for the options expiry as it could present an imbalance of forces. This feature is not true for futures markets, where longs (buyers) and shorts (sellers) are matched at all times.

Options are divided into two independent segments: call (buy) options which are most commonly used for neutral-to-bullish strategies, and the neutral-to-bearish put (sell) options.

Therefore, while Ether futures longs and shorts are matched at all times, options markets provide a clear picture of whatever side takes the advantage.

*Ether price at Coinbase, USD. Source: TradingView*

Ether’s futures open interest was drastically reduced after the correction

The relentless drop initiated after the $4,380 all-time high on May 12 took eleven days, and the price eventually bottomed at $1,730. However, the low prices did not last long, and Ether quickly re-established support at $2,400. The open interest on futures was reduced by 54% to $5.2 billion as leverage longs were liquidated and short-sellers took profits.

As for the $980 million in Ether futures set to expire on Friday, Huobi exchange takes the lead with $300 million in open interest. CME closely follows it, however, CME traders traditionally roll over most of the positions over the last couple of trading days, so this number could be greatly reduced as we approach the deadline.

*Ether May 28 futures open interest. Source: Huobi, CME, OKEx, Deribit, BitMEX*

At first glance, options favor neutral-to-bullish call options

For May 28 expiry, there are 189,000 call (buy) Ether options stacked against 153,900 put (sell) options. This initial analysis gives the neutral-to-bullish calls a 23% advantage. However, one must account for a right to buy Ether at $3,200 or higher in less than 16 hours isn't particularly desirable right now.

The same can be said for the ultra-bearish put options at $2,300 and lower. To correctly analyze the potential pressure from Friday's expiry, one should exclude both extremes.

Notice how $3,000 is a decisive level for bulls as there are 30,700 call options stacked there versus 15,000 put options. This means if bears manage to keep Ether's price below that price, the neutral-to-bullish call options amount to 54,500 ETH, equivalent to $150 million.

Meanwhile, the neutral-to-bearish put options at $3,000 and above totals 52,700 ETH, which is $145 million open interest. This results in a balanced force from the options expiry.

Bulls have little incentives to push the price above $3,000

If bulls decide to display strength, pushing the price above $3,000, the difference will shift by 45,700 ETH contracts worth $125 million. Albeit significant, it's probably not enough to make the price higher.

Futures' traders have been less than optimistic after the recent heavy liquidations reported by Cointelegraph on May 24. Regarding options, pressures from calls and puts seem balanced at the present level and should present no surprise on Friday.

Huobi, OKEx, and Deribit expiries take place on May 28 at 8:00 AM UTC. The CME futures and options happen a little later on the day at 3:00 PM UTC.

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

Who’s bullish now? XRP below $1, futures open interest down by 75%

May 24, 2021 Coin Telegraph

<div>Who's bullish now? XRP below , futures open interest down by 75%</div>

Coin Telegraph

Traders are clearly nervous after XRP corrected by 54%, and the futures open interest premium flipped negative.

XRP price soared 260% in April, moving from $0.57 on March 31 to $1.97 on April 14, its highest level since January 2018. The move caused XRP futures to reach an impressive $2.1 billion open interest.

However, on May 19, as cryptocurrency markets collapsed, XRP lost 60% in 4 days, liquidating $510 million long positions. The futures open interest retraced to $550 million, roughly the same level from early February when the altcoin traded near $0.40.

Investors are now questioning if XRP futures will ever be able to recover to a multi-billion market. Were April's figures inflated by excessive leverage, or is it just a matter of time until it rebounds to the previous levels?

*XRP futures aggregate open interest. Source: Bybt*

To understand if the $2.1 billion futures market was an anomaly, one needed to analyze volumes and, more importantly, their premium. This indicator measures the price gap between the futures contract prices and the regular spot market.

If some unprecedented bullishness was set in place, there's a good chance that futures open interest will take months to regain the impressive levels seen previously. Not only would traders' confidence take longer to recover, but an exaggerated premium could have been inflating the derivatives markets.

Volumes spiked in unison, which is healthy

The volume of futures markets provides a hint on whether some unusual phenomena took place. By comparing this data with regular XRP spot markets, there should be a clear correlation, and futures volumes must have grown considerably to sustain the $2.1 billion open interest.

*XRP futures aggregate volumes (above) versus spot exchanges, USD. Source: Coinalyze.net*

Although there was a significant spike on April 5, the movement was accompanied by regular spot exchange volumes. Moreover, the $10 billion daily turnover in futures markets is more than enough to sustain the $2.1 billion open interest.

The futures premium reached unsustainable levels

To assess whether traders could have created an unusual open interest based on excessive optimism, one needs to analyze futures prices premium versus regular spot markets. The 3-month futures should usually trade at a 1.2% to 2.4% premium, or 8% to 15% annualized.

Futures contract sellers are essentially postponing the trade, therefore requiring more money to compensate. However, during extremely bullish markets, the premium can soar well above 3.8%, which is equivalent to 25% per year.

*Binance June XRP futures premium versus spot markets. Source: TradingView*

As depicted above, June contracts traded almost 10% above regular spot exchanges. That is nothing short of spectacular as it represents a 75% annualized premium. However, these levels are completely unsustainable and transpire excessive leverage from buyers.

Cryptocurrency markets are highly volatile, and no one should bet that any event will not repeat itself. However, there is some indication that traders became so confident of themselves that they refused to reduce positions even if being paid 8% or 9% above market levels.

Markets tend to exaggerate in both directions

Therefore, there is reason to believe that the current $600 billion futures open interest and negative premium signals excessive fear and does not correctly reflect the market. XRP price has risen 294% in 2021, and the recent Ripple Labs news regarding the United States Securities and Exchange Commission lawsuit is somewhat encouraging.

Investors are not wrong to expect the futures open interest to recover the $1 billion mark as XRP holds above $0.80. However, it is unlikely that the markets will reach a 50% or higher annualized premium, let alone a $2 billion open interest anytime soon. It usually takes some time for longs to regain confidence, which is healthy for another leg up.

Whales scooped up $5.5B in Bitcoin as BTC price dropped below $36K

May 21, 2021 Coin Telegraph

Bitcoin

Derivatives data shows whales aggressively bought the dip as Bitcoin price dropped below $36,000, but that doesn't mean BTC has bottomed yet.

The stream of negative regulatory news concerning Bitcoin (BTC) and cryptocurrencies has been non-stop over the past couple of weeks.

Today's 'FUD' news that failed to cite any actions and merely refreshes old information came from China. A statement from the Chinese government revealed plans to "crackdown on Bitcoin mining and trading behavior."

While retail traders are easily scared by this type of news, whales and market makers know how to spot a buying opportunity, which was the case for today's drop to $36,200.

China banned Bitcoin trading…in 2017

The Chinese Financial Stability and Development Committee minutes presented general guidelines on multiple issues, including reforming mid-sized financial institutions and cracking down on illegal securities activities. Therefore, it was not a targeted attack on Bitcoin, neither did it differ from the actions and discourse from previous years.

On May 18, trade associations under the People's Bank of China warned financial institutions and other member organizations not to engage in crypto business transactions.

However, crypto trading in China has been banned since Sep. 2017 and concerns regarding the carbon emissions of Bitcoin mining operations were expressed over three weeks ago by Chinese state media PengPai.

Even market-making platforms have been targeted by Chinese authorities since 2018. Some crypto trading sites continued to operate illegally in the country, but most were identified and shut down by authorities in 2019.

Derivatives indicators signal accumulation

*OKEx top traders BTC long-to-short ratio. Source: Bybt*

Exchange-provided data highlights traders' long-to-short net positioning. By analyzing every client's position on the perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.

Whales and market makers at OKEx reached a 1.08 long-to-short ratio in the early hours of May 21, favoring longs by 8%. It is worth noting that this level was the lowest in 30 days, indicating a lack of conviction. However, these pro traders entered bullish positions over the day as Bitcoin retraced below $37,000, favoring longs by 62%.

Volume spikes confirm the theory

Trading volume is the best indicator to confirm whale activity, and those peaks need to coincide with price bottoms. Even though every trade has a buyer and a seller, extreme volatility can occur on low trading volumes, therefore not necessarily involving pro traders.

*Aggregate Bitcoin spot volume. Source: Coinalyze.net*

By looking at the above data, there should be no doubt that whales and market makers aggressively bought the $36,200 dip on May 21. Spot exchange volumes surpassed $5.6 billion in four hours, which is extreme even for a 12% price movement.

To put things in perspective, the daily average volume over the past month stands at $11 billion. Therefore, by combining this data with derivative exchanges long-to-short, one should assume that some heavy players were brave enough to buy today's dip.

Although no one can precisely forecast whether $35,200 will hold over the weekend, one should expect those heavy hands to maintain their position for a very long time.

Has Wall Street taken over Bitcoin?

May 21, 2021 Coin Telegraph

Banks

Institutional adoption is threatening Bitcoin's revolutionary mission, says Ben Hunt, founder of Second Foundation Partners

Ben Hunt, founder of Second Foundation Partners and lead author at the Epsilon Theory blog is convinced institutional adoption poses an existential threat for Bitcoin's identity as an instrument of financial freedom.

As investment funds, banks and tech companies are getting involved in the space, Bitcoin's fundamental properties – permissionless access and censorship resistance – are becoming increasingly marginalized, Hunt told Cointelegraph in an exclusive interview.

“What we are seeing is the Facebook-ization of Bitcoin. And it becomes absolutely controlled and in service to Wall Street and the government”, said Hunt.

According to Hunt, institutions have created “securitized”, “permissioned” versions of Bitcoin, allowing investors to get exposure to the world's largest cryptocurrency without holding it directly.

In Hunt’s view, governments are encouraging Wall Street’s co-option of Bitcoin, as that will make the leading cryptocurrency easier to control: as Hunt points out, financial institutions in the US are required to disclose their customers’ identities and transaction information according to the Bank Secrecy Act.

“If you put money into a Bitcoin related private fund, there's no more revolution, there's no more resistance associated with that”, he said.

But is it really too late to preserve Bitcoin’s revolutionary identity?

To find out, watch the full interview on our YouTube channel and don’t forget to subscribe!

Bears positioned to take the lead as $930M in Bitcoin options expire Friday

May 20, 2021 Coin Telegraph

bitcoin options

Derivatives data for Bitcoin weekly options suggests bears may have the upper hand in tomorrow’s $930 million expiry.

On May 21 at 8:00 AM UTC, $930 million worth of Bitcoin (BTC) weekly options will expire. As usual, the leader Deribit holds a 90% share, but the recent market drop might have given bears too much power.

While traders and analysts scramble to find a rationale for the 53% drop from the $64,900 all-time high, ExoAlpha CIO David Lifchitz perfectly described the recent market conditions when he said:

“This looks like the final flush-out after the last couple of months of an irrational bull run, shitcoin frenzy and other antics.”

The correction was so strong that even avid Bitcoin defenders flipped, including the global Chief Investment Officer of investment giant Guggenheim, who dubbed crypto markets as ‘tulipmania’.

Regardless of the reasons behind the price action, traders that held previously inexpensive rights to sell Bitcoin at $45,000 or $46,000 are now celebrating.

*Bitcoin aggregate weekly options for May 21. Source: Bybt*

Don’t fall for what looks to be a 'balanced' situation

Although the current setup looks balanced between call (buy) options and the neutral-to-bearish put (sell) options, Bitcoin’s 30% drop has shifted the balance to favor bears over the past two weeks.

Out of the 11,872 call options, only 15% have been created using $44,000 and lower strikes. This means the remaining 85% became worthless, as there are less than 14 hours left for the weekly expiry. Therefore, the 1,850 neutral-to-bullish call options below $44,500 represent a $75 million open interest.

On the other hand, 88% of the put options have $36,000 or higher strikes. Those options allow its buyer to sell Bitcoin at a fixed price, so most commonly used on neutral-to-bearish strategies.

The bear's advantage is likely to spill off for next week

Unlike futures contracts, there is not much gain in rolling over a losing position to the following week. As we approach the expiry date, a right to acquire Bitcoin at $50,000 is effectively worthless right now. That’s the reason why bears’ current advantage will likely continue exerting pressure.

Overall, the put options at $36,000 and higher amount to $400 million in open interest. The $325 million difference favoring the more neutral-to-bearish options is a decent advantage as we approach Friday’s expiry.

However, it is important to highlight that monthly options usually handle most of the action, and May 28 will be no different with $1.95 billion open interest. While it seems premature to call it, bears will likely continue to pressure markets considering there are almost no call options at $38,000 or lower for next week.

Bear market? Analyst weighs in after Bitcoin drops 50% from its $65K all-time high

May 20, 2021 Coin Telegraph

Bear market? Analyst weighs in after Bitcoin drops 50% from its K all-time high

Bitcoin Price

Analysts have mixed opinions now that Bitcoin price trades 40% away from its all-time high. ExoAlpha CIO David Lifchitz gives his take on what happened and what’s next for BTC.

On April 14 Bitcoin price hit a new all-time high at $64,850 and many of the crypto sector’s top analysts were calling for BTC to carry on to at least $100,000 before the rally showed any signs of possible exhaustion.

Fast forward 37 days and Bitcoin now trades nearly 50% down from its all-time high after dropping as low as $30,000 to mark the sharpest correction in BTC price since March 2020.

The general reaction among analysts has been mixed as some cite various metrics which suggest that $30,000 is the bottom for BTC. Others advise caution as the failure of BTC price to show a strong bounce from the current oversold conditions is a signal that further downside could be in store.

To get a better handle on exactly what happened to Bitcoin and where the price might go from here, Cointelegraph spoke with David Lifchitz, managing partner and chief investment officer at ExoAlpha.

Cointelegraph: What led the market to this precipice and in your opinion what pushed Bitcoin price over the edge?

David Lifchitz: Last week, just a few hours before Elon Musk's incendiary tweet about Bitcoin, we warned that there was more downside potential than upside potential for Bitcoin due to a lack of any upward catalyst on the horizon, and we have been served.

Believe me or not, but on May 18, we discussed that when looking at Bitcoin on a weekly basis, we could see an ugly head and shoulders pattern with a neckline around $45,000. The top of the left shoulder reached during the week of February 8, the head (top) above $60,000 during the week of April 5, and the right shoulder top reached during the week of May 3.

CT: Why was this head and shoulders pattern problematic?

DL: Bitcoin was trading then around $43,000 right below the neckline, which was not very healthy as the expected output of such pattern would be a downward move of the same amplitude as between the neckline level and the top of the head, which were respectively about $45,000 and $60,000.

This would mean a potential slide down to $30,000 which is where Bitcoin initially found support after taking a breather after its fall 2020 bullrun. This was just some technical analysis and probabilities but nothing guaranteed a return to $30,000. The price breaking down below $50,000, a level which had acted as previous support, drastically weakened Bitcoin in the short term.

Moreover, Grayscale’s Bitcoin Trust (GBTC) trading at a historical discount could also be putting pressure on Bitcoin prices and if Grayscale doesn't act swiftly to reduce the discount, which it doesn't seem to have decided to do just yet, but we won’t go into to much detail on that.

CT: Were institutions or retail behind the drop?

DL: The head and shoulders pattern we discussed with a downside target around $30,000 that we discussed earlier has been spot on, even if it occurred quite quickly!

This looks like the final flush-out after the last couple of months of an irrational bull run, shitcoin frenzy and other antics.

However, as the dip at $30,000 has already been bought back up to $38,000 and as $40,000 looks like now to the new resistance level, let's see how Asia will react and how the US-time zone then reacts to the activity that occurs overseas.

If we compare the May 19, 2021 selloff to the March 13, 2020 sell-off, we can see that the current dip was quickly bought, whereas the dip was only bought the next day in March 2020. This is a sign that more short term, automated traders are in the market these days than a year ago.

What could have sparked the selloff? Definitely some heavy selling of Bitcoin. Some might be wondering if Musk eventually dumped his Tesla Bitcoin (after having loaded up on puts of course) or was Grayscale forced to sell some of their holdings to meet a large investor request? Who knows! But the overleveraged environment in which crypto traders evolve definitely works in both ways.

Moreover, traditional markets being overstretched to the point of letting go probably didn't help as well.

Disclaimer. Cointelegraph does not endorse any content of product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

3 good reasons why $30,000 is probably the bottom for Bitcoin

May 19, 2021 Coin Telegraph

3 good reasons why ,000 is probably the bottom for Bitcoin

bitcoin futures

Regulatory concerns, a bit of FUD and the uncertainties surrounding Tether appear to have exaggerated the Bitcoin price sell-off but derivatives data suggest that the bottom is likely in.

After an agonizing 35% loss in the past 24-hours, Bitcoin (BTC) finally bounced at $30,000 in the May 19 morning trading session. A total of $3.5 billion in liquidations took place, which might have accelerated the movement but they can't really be blamed for the total move.

However, the weakness in derivatives markets did give some strong signals that panic was instilled, causing unsustainable levels. These can be measured by the price gap between the futures markets and regular spot exchanges, along with the negative funding rate on perpetual contracts.

*Aggregate Bitcoin futures liquidations. Source: Bybt*

Multiple culprits catalyzed the drop, including Elon Musk, Tether and U.S. regulation

Pinpointing the exact culprit for the price movement is a daunting task, although Elon Musk's remarks on Bitcoin mining coal usage likely played some role. However, May 19 marks the deadline for Tether Holdings Limited's breakdown of Tether's (USDT) reserves to the New York Attorney General's office.

Caitlin Long, the founder and CEO of Avanti Financial stated that traders might have felt compelled to sell other cryptocurrencies to reduce their total risk exposure given the credit risk that emerged from Tether reserves disclosure.

As reported by Cointelegraph, regulatory uncertainties entered the spotlight earlier this month when U.S. Treasury Secretary Janet Yellen and Securities and Exchange Commission chair Gary Gensler expressed their concerns about the cryptocurrency sector.

On May 18, a banking and trade association under the People's Bank of China issued a statement titled "Preventing the risk of virtual currency transaction speculation." It then went on calling on member institutions to abide by existing regulatory provisions regarding digital currencies.

Futures markets finally showed signs of stress

The combination of these bearish factors resulted in the 50% correction seen in the past 9 days and its impact on futures markets finally showed clear signals of exhaustion. By analyzing the futures markets' price difference versus regular spot exchanges, one can better understand how the price move has impacted professional traders.

*OKEx 3-month Bitcoin futures annualized premium. Source: Skew*

Typically, the 3-month futures should trade with an 8% to 15% annualized premium, comparable to the stablecoin lending rate. By postponing settlement, sellers demand a higher price, causing the price difference.

Over the past couple of weeks, the indicator sustained above the 8% level, signaling confidence. However, during the dip to $30,000 on May 19, the situation changed drastically as a backwardation emerged for the first time in one year. In this case, the futures markets trade below the regular spot exchange prices, a very concerning situation.

As the futures premium quickly re-established a healthy 7% level, one might conclude that it had been caused by stop loss and liquidation orders that pushed the price down to $30,000.

Retail traders have also been stopped out

To better assess whether this movement was something specific to the monthly and quarterly futures, we should look at the perpetual futures contracts. These derivatives, also known as inverse swaps, have an embedded rate usually charged every eight hours to ensure there are no exchange risk imbalances.

Whales, arbitrage desks, and market makers avoid exposure on these contracts due to their variable funding rate. When longs are demanding more leverage, they will be the ones paying the fee. The opposite holds when shorts are using more leverage, thus causing a negative funding rate.

*Bitcoin futures 8-hour funding rate. Source: Bybt*

As shown above, the indicator entered unsustainable levels, as a negative 0.20% rate equals a 4.3% weekly fee paid by short-sellers. This situation is seldom sustainable for more than a couple of days, as it incentives buyers to enter long positions.

Both the U.S. regulatory uncertainty and New York Attorney General's office action on Tether's disclosure might take months or years to develop. Meanwhile, China's actions show no difference from the Sept. 2017 move when the country announced the shutdown of all exchanges operations and ICO offers.

Thus, considering the negative futures premium and perpetual contracts funding rate impact, it is safe to say that $30,000 was the rock bottom of liquidations.

The 54% price correction from the $64,900 all-time high marks the exaggerated market reaction to speculation, rather than the reaction to news that could harm Bitcoin's functionalities and importance as a scarce and censorship-resistant asset.

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.

$83K Bitcoin price in the cards after data shows BTC whales bought the dip

May 18, 2021 Coin Telegraph

Bitcoin

Two key Bitcoin price metrics signal that whales bought the dip to $42,000, a hint that BTC may be gearing up for a new all-time high by mid-June.

As Bitcoin (BTC) tested the $43,000 support for the third consecutive day, whales bought the dip on derivatives exchanges. While there has been no significant price change, the Bitcoin futures premium reached its lowest level in six months. This indicator matches Dec. 11, 2020, when Bitcoin hit a $17,600 low just 10 days after making an all-time high at $19,915.

*Bitcoin/USD price on Coinbase, December 2020. Source: TradingView*

In December 2020, derivatives action triggered a 95% rally in 23 days, taking Bitcoin to a new high at $42,000. In addition to the futures premium bottoming, rumors of potentially harmful United States regulation played a central-stage role in the market downturn in both instances.

Regulatory uncertainties are back to the spotlight

This time around, U.S. Treasury Secretary Janet Yellen stated at the Washington Square Journal CEO Council Summit on May 4 that:

"There are issues around money laundering, Bank Secrecy Act, use of digital currencies for illicit payments, consumer protection and the like."

On May 6, U.S. Securities and Exchange Commission chair Gary Gensler punted to Congress the idea of providing more regulatory oversight to the crypto space. Gensler said:

"Right now, there's not a market regulator around these crypto exchanges, and thus there's really no protection against fraud or manipulation."

Adding to the regulatory haze, on May 11, the U.S. Securities and Exchange Commission issued an investor warning pointing out t risks of mutual funds that have exposure to Bitcoin futures.

*OKEx Bitcoin 3-month futures annualized premium, December 2020. Source: Skew*

As Bitcoin reached a $19,915 all-time high on Dec. 1 and the futures premium spiked above 15%, the premium reacted to the price correction. Although the 8% low seems near the previous month’s average, it is very modest considering Bitcoin had rallied 90% in two months.

Notice that as soon as the $17,600 level proved its strength, the futures premium spiked to 15%, indicating optimism.

*OKEx Bitcoin 3-month futures annualized premium, May 2021. Source: Skew*

The current situation began differently, as the market has been excessively optimistic from the start. However, the situation drastically changed over the past week as Bitcoin dropped 26%. This move caused the futures premium to reach its lowest level in six months at 8%.

Whales aggressively bought below $43,000

However, the bearish sentiment on May 17 lasted for a very short period, as whales finally decided it was time to buy the dip.

The top traders' long-to-short indicator is calculated using clients' consolidated positions, including margin, perpetual and futures contracts. This metric provides a broader view of the professional traders' effective net position by gathering data from multiple markets.

*Top traders Bitcoin long-to-short ratio at OKEx. Source: Bybt*

Top traders on OKEx moved from a 1.62 long-to-short ratio on May 16 to a 2.74 peak as Bitcoin tested the $43,000 support in the early hours of May 17. This data indicates that whales and market makers had long positions almost three times larger than shorts, which is very uncommon.

While their bullish bet remains, it signals a complete pattern from the previous week. Business intelligence firm MicroStrategy also scooped up another $10 million worth of Bitcoin at an average price of $43,663.

Although it might be too soon to declare that the correction phase has ended, there seems to be enough evidence regarding the futures premium bottoming and whales' intense buying activity below $43,000.

If history repeats and a 95% rally follows suit, Bitcoin could reach $83,000 in mid-June.

derivatives