Bitcoin bears well positioned for Friday’s $2.5 billion options expiry

December 28, 2022 Coin Telegraph

<div>Bitcoin bears well positioned for Friday's .5 billion options expiry</div>

3AC

BTC bears are outnumbered based on open interest volume, but bulls' hopes of $20,000 before 2023 have already been hampered.

A year-end wager for $80,000 Bitcoin (BTC) might seem entirely off the table now, but not so much back in March as BTC rallied to $48,000. Unfortunately, the two-week 25% gains that culminated with the $48,220 peak on March 28 were followed by a brutal bear market.

It is important to highlight that the U.S. stock market likely has driven those events, as the S&P 500 index peaked at 4,631 on March 29 but traded down 21% to 3,640 by mid-June.

Moreover, such a date coincides with the centralized cryptocurrency lender Celsius issues, which halted withdrawals on June 12, and the venture capital 3 Arrows Capital (3AC) insolvency on June 15.

While the fear of an economic downturn has undoubtedly triggered the cryptocurrency bear market, the reckless mismanagement of centralized billion-dollar entities is what sparked the liquidations, pushing prices even lower.

To cite a few of those events, TerraUSD/Luna collapsed in mid-May, crypto lender Voyager Digital in early July, and the second largest exchange and market marker, FTX/Alameda Research's bankruptcy in mid-November.

In addition, the quasi-tragical sequence of events hit unsuspected victims, including publicly-listed mining companies such as Core Scientific, forced to file for Chapter 11 bankruptcy on Dec. 21. Despite the bulls' best efforts, Bitcoin has not been able to post a daily close above $18,000 since Nov. 9.

This movement explains why the $2.47 billion Bitcoin year-end options expiry will likely benefit bears despite being vastly outnumbered by bullish bets.

Most bullish bets targeted $20,000 or higher

Bitcoin broke below $20,000 in early November when the FTX collapse began, taking year-end option traders by surprise.

For instance, a mere 18% of the call (buy) options for the monthly expiry have been placed below $20,000. Thus, bears are better positioned even though they placed fewer bets.

*Bitcoin options aggregate open interest for Dec. 30. Source: CoinGlass*

A broader view using the 1.61 call-to-put ratio largely favors bullish bets because the call (buy) open interest stands at $1.52 billion against the $950 million put (sell) options. Nevertheless, as Bitcoin is down 19% since November, most bullish bets will likely become worthless.

For instance, if Bitcoin's price remains below $17,000 at 8:00 am UTC on Dec. 30, only $33 million worth of these calls (buy) options will be available. This difference happens because there is no use in the right to buy Bitcoin at $17,000 or $18,000 if it trades below that level on expiry.

Bears could secure a $340 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Dec. 30 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $15,000 and $16,000: 700 calls vs. 22,500 puts. The net result favors bears by $340 million.
Between $16,000 and $17,000: 2,000 calls vs. 16,500 puts. The net result favors bears by $240 million.
Between $17,000 and $18,000: 7,500 calls vs. 13,600 puts. Bears remain in control, profiting $110 million.
Between $18,000 and $19,000: 12,100 calls vs. 11,300 puts. The net result is balanced between bulls and bears.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

Bitcoin bulls need to push the price above $18,000 on Dec. 30 to flip the table and avoid a potential $340 million loss. However, that movement seems complicated considering the ongoing pressure for U.S. regulation and insolvency fear, including the biggest exchanges, despite the recent proof of reserves effort.

Considering the above, the most probable scenario for Dec. 30 expiry is the $15,000-to-$17,000 range providing a decent win for bears.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin rebound to $18.4K? BTC price derivatives show strength at key support zone

December 21, 2022 Coin Telegraph

Bitcoin rebound to .4K? BTC price derivatives show strength at key support zone

Bankruptcy

Miners are in deep trouble due to increased hash rate and energy costs, but pro traders slightly added to their longs despite the recent BTC pullback.

Bitcoin (BTC) price lost 11.3% between Dec. 14 and Dec. 18 after briefly testing the $18,300 resistance.

The move followed a 7-day correction of 8% in the S&P500 futures after the U.S. Federal Reserve chair Jerome Powell issued hawkish statements after raising the interest rate on Dec. 14.

Bitcoin price retreats to channel support

Macroeconomic trends have been the main driver of recent movements. For instance, the latest bounce from the 5-week-long ascending channel support at $16,400 has been attributed to the Central Bank of Japan's efforts to contain inflation.

*Bitcoin 12-hour price index, USD. Source: TradingView*

The Bank of Japan increased the limit on government bond yields on Dec. 20, which are now trading at levels unseen since 2015.

However, not everything has been positive for Bitcoin as miners have struggled with the hash rate nearing all-time high and increased energy costs. For example, on Dec. 20, Bitcoin miner Greenidge reached an agreement with its creditor to restructure $74 million worth of debt — although the deal requires the miner to sell nearly 50% of their equipment.

Moreover, Bitcoin mining listed company Core Scientific reportedly filed for Chapter 11 bankruptcy on Dec 21. While the company continues to generate positive cash flows, the income is insufficient to cover the operational costs, which involve repaying the lease for its Bitcoin mining equipment.

During these events, Bitcoin has held $16,800, so there are buyers at these levels. But let's look at crypto derivatives data to understand whether investors have increased their risk appetite for Bitcoin.

Bitcoin futures are back to backwardation

Fixed-month futures contracts usually trade at a slight premium to regular spot markets because sellers demand more money to withhold settlement for longer. Technically known as contango, this situation is not exclusive to crypto assets.

In healthy markets, futures should trade at a 4% to 8% annualized premium, which is enough to compensate for the risks plus the cost of capital.

*Bitcoin 2-month futures annualized premium. Source: Laevitas.ch*

It becomes clear that the attempts to push the indicator above zero have utterly failed over the past 30 days. The absence of a Bitcoin futures premium indicates higher demand for bearish bets, and the metric has worsened from Dec. 14 to Dec. 21.

The current 1.5% discount indicates professional traders' reluctance to add leveraged long (bull) positions despite being actually paid to do so.

Top traders unwilling to let go of their longs

Still, investors should analyze the long-to-short ratio to exclude externalities that have solely impacted the quarterly contracts' premium.

The metric gathers data from exchange clients' positions on the spot and perpetual contracts, better informing how professional traders are positioned.

*Exchanges' top traders Bitcoin long-to-short ratio. Source: Coinglass*

Even though Bitcoin briefly traded below $16,300 on Dec. 19, professional traders did not reduce their leverage long positions according to the long-to-short indicator. For instance, the Huobi traders' ratio stabilized at 1.01 between Dec. 16 and Dec. 21.

Similarly, OKX displayed a modest increase in its long-to-short ratio, as the indicator moved from 1.02 to the current 1.04 in five days.

Lastly, the metric slightly increased from 1.05 to 1.07 at Binance, confirming that traders did not become bearish after the ascending channel support was tested.

Strength of $16,800 support is a bullish indicator

Traders cannot ascertain that the absence of a futures premium necessarily translates to bearish price expectations — for instance, the lack of confidence in the exchanges could have driven away potential leverage buyers.

Moreover, the resilience of the top traders' long-to-short ratio has shown that whales and market makers did not reduce leverage longs despite the recent price dip.

In essence, the Bitcoin price movement has been surprisingly positive, considering the negative newsflow from miners and the bearish influence of raising interest rates on risk markets.

Therefore, as long as the $16,500 channel support continues to hold, bulls have reason to believe that another shot at the $18,400 upper band limit is viable before year-end.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

French regulator AMF blacklists only two crypto websites in the whole year

December 21, 2022 Coin Telegraph

bitcoin regulation

The AMF and ACPR have blacklisted only two crypto-related websites amid the bear market of 2022 versus 24 such websites last year.

Financial regulators in France continue flagging illicit players on the foreign exchange (forex) and cryptocurrency markets, blacklisting a fresh batch of related websites.

The French stock markets regulator, the Autorité des Marchés Financiers (AMF), and the Prudential Supervision and Resolution Authority (ACPR), on Dec. 21, updated a blacklist of websites identified as unauthorized investments in forex and crypto assets.

Out of the 15 newly-blacklisted websites, only two sites imply a direct connection with crypto in their name. These websites include 24cryptoforextrading.net and cryptoneyx.io.

According to the announcement, the AMF and ACPR have flagged significantly fewer crypto-related websites year-over-year. In 2022, the authorities blacklisted a total of two websites in the crypto derivatives category, down 92% from 24 sites last year.

In contrast, the regulators added a total of 49 names to the list of sites that are not authorized to offer forex investments vs 61 of such websites in 2021.

The AMF and ACPR urged investors to be careful and ensure that intermediaries offering financial products or services are authorized to operate in France. The regulators noted that investors should consult with the official register of authorized investment service providers and the list of authorized intermediaries in the financial investment adviser or crowdfunding categories.

A significant decrease in the amount of crypto-related websites flagged by the AMF in 2022 may apparently be attributed to the ongoing cryptocurrency winter. Since 2021, the cryptocurrency market has shrunk more than 70% since November 2021, causing massive losses for crypto investors.

The AMF press office did not immediately respond to Cointelegraph’s request for comment.

As previously reported, the French government is known for its friendly stance on the digital asset industry, issuing multiple approvals to major global cryptocurrency firms. In May, the AMF issued registration to major global crypto exchange Binance, officially allowing the firm to provide crypto-related services in France.

Ethereum bounces above $1.2K, but derivatives metrics show traders fear a collapse

December 20, 2022 Coin Telegraph

Ethereum bounces above .2K, but derivatives metrics show traders fear a collapse

Coin Telegraph

Demand for leverage buying remains absent in ETH despite the recent bounce to $1,200 as the U.S. Federal Reserve continues to hike interest rates.

Ether (ETH) gained 5.6% on Dec. 20 after testing the $1,150 support the previous day. Still, a bearish trend prevails, forming a three-week-long descending channel, a price action attributed to expectations of further U.S. Federal Reserve interest rate hikes.

*Ether/USD price index, 12-hour. Source: TradingView*

Jim Bianco, head of institutional research firm Bianco Research, said on Dec. 20 that the Fed will keep the economy tightening in 2023. Later that day, Japan’s central bank increased interest rates to fight inflation, far later than its counterparties. The unexpected move made analysts more bearish toward risk assets, including cryptocurrencies.

Ethereum might have caught some tailwind after the global payment processor Visa proposed a solution to allow automatic funding from Ethereum wallets. Auto-payments for recurring bills aren’t possible for self-custodial wallets so Visa would rely on smart contracts, known as “account abstraction.” Curiously, the concept emerged in 2015 with Vitalik Buterin.

The most pressing issue, however, is regulation. On Dec. 19, the U.S. House Financial Services Committee reintroduced legislation aimed at creating innovation offices within government agencies dealing with financial services. According to North Carolina Representative Patrick McHenry, companies could apply for an “enforceable compliance agreement” with the offices at agencies like the Securities and Exchange Commission and Commodity Futures Trading Commission.

Consequently, investors believe Ether could revisit sub-$1,000 prices as the DXY dollar index loses strength while the 10-year U.S. treasury yields show higher demand for protection. Trader CryptoCondom expects the next couple of months to be extremely bearish for crypto markets.

Algos see $DXY down & bid up crypto. BOJ overnight isn’t bullish…it’s a sign of things breaking.
DXY ⬇️ & 10Y ⬆️ = Recession
I will be shorting the market waiting for three digit $ETH.
Crypto IS the future of France but the next 2-3m will feel like being in the Gulag instead. pic.twitter.com/nLKqtNz3C3
— CryptoCondom (@crypto_condom) December 20, 2022

Let's look at Ether derivatives data to understand if the bearish macroeconomic movement has negatively impacted investors' sentiment.

The recent bounce above $1,200 did not instill bullishness

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. When the futures trade at a discount versus regular spot markets, it shows a lack of confidence from leverage buyers, which is a bearish indicator.

*Ether 2-month futures annualized premium. Source: Laevitas.ch*

The chart above shows that derivatives traders continue to use more leverage for short (bear) positions as the Ether futures premium remains negative. Still, the absence of leverage buyers' demand does not mean traders expect further adverse price action.

For this reason, traders should analyze Ether's options markets to understand whether investors are pricing higher odds of surprise adverse price movements.

Options traders not keen on offering downside protection

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew indicator below -10%, meaning the bearish put options are discounted.

*Ether 60-day options 25% delta skew: Source: Laevitas.ch*

The delta skew increased after Dec. 15 from a fearful 14% against the protective put options to the current 20%. The movement signaled that options traders became even less comfortable with downside risks.

The 60-day delta skew signals whales and market makers are reluctant to offer downside protection, which seems natural considering the 3-week-long descending channel.

In a nutshell, both options and futures markets point to pro traders not trusting the recent bounce above $1,200. The present trend favors Ether bears because the odds of the Fed maintaining its balance sheet reduction program seem high, which is destructive for risk markets.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

$16K retest the most likely path for Bitcoin, according to 2 derivative metrics

December 19, 2022 Coin Telegraph

Asia

Top traders' long-to-short ratio and stronger demand for stablecoins in Asia indicate higher odds of further price correction.

Bitcoin (BTC) broke below $16,800 on Dec. 16, reaching its lowest level in more than two weeks. More importantly, the movement was a complete turnaround from the momentary excitement that had led to the $18,370 peak on Dec. 14.

Curiously, Bitcoin dropped 3.8% in seven days, compared to the S&P 500 Index's 3.5% decline in the same period. So from one side, Bitcoin bulls have some comfort in knowing that correlation played a key role; at the same time, however, it got $206 million of BTC futures contracts liquidated on Dec. 15.

Some troublesome economic data from the auto loan industry has made investors uncomfortable as the rate of defaults from the lowest-income consumers now exceeds 2019 levels. Concerns emerged after the average monthly payment for a new car reached $718, a 26% increase in three years.

Furthermore, alongside the Bank of England, two central banks increased interest rates by 50 basis points to multiyear peaks — highlighting that borrowing costs would likely continue rising for longer than the market had hoped.

Uncertainty in cryptocurrency markets reemerged after two of the most prominent auditors suddenly dropped their services, leaving exchanges hanging. For instance, the website of the French auditing firm Mazars Group is offline. The firm previously worked with several exchanges, including Binance, KuCoin and Crypto.com.

Meanwhile, accounting firm Armanino has also reportedly ended its crypto auditing services. The auditor worked with several crypto trading platforms like OKX, Gate.io and the troubled FTX exchange. Curiously, Armanino was the first accounting firm to establish relationships in the crypto industry, dating back to 2014.

Let's look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

The Asia-based stablecoin premium drops to 2-month low

The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, the stablecoin's market offer is flooded, causing a 4% or higher discount.

*USDC peer-to-peer vs. USD/CNY. Source: OKX*

Currently, the USDC premium stands at 101.8%, up from 99% on Dec. 12, indicating higher demand for stablecoin buying from Asian investors. The data gained relevance after the brutal 9.7% correction in five days since the $18,370 peak on Dec. 14.

However, this indicator should not necessarily be viewed as bullish because the stablecoin could have been acquired to protect from downside risks in cryptocurrencies — meaning investors are becoming more bearish.

Leverage buyers slowly thrown in the towel

The long-to-short metric excludes externalities that might have solely impacted the stablecoin market. It also gathers data from exchange clients' positions on the spot, perpetual, and quarterly futures contracts, thus offering better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

As Bitcoin broke below the $16,800 support, professional traders decreased their leverage long positions according to the long-to-short indicator.

For instance, the ratio for Binance traders slightly declined from 1.11 on Dec. 14 to the current 1.04 level. Meanwhile, Huobi displayed a modest decrease in its long-to-short ratio, with the indicator moving from 1.01 to 0.05 in the same period.

Lastly, at the OKX exchange, the metric decreased from 1.00 on Dec. 14 to the current 0.98 ratio. So, on average, traders have decreased their leverage-long ratio over the last five days, indicating lesser confidence in the market.

A potential retest of $16,000 is likely in the making

The moderate 101.8% stablecoin premium in Asia, paired with the information of top traders' long-to-short indicator decline, tells a story of buyers gradually ceding to pessimism.

Furthermore, the $206 million liquidation in long BTC futures contracts signals that buyers continue to use excessive leverage, setting up the perfect storm for another leg of correction.

For now, the Bitcoin price continues to be heavily dependent on traditional stock markets. Still, weak macroeconomic data and the uncertainty brought by crypto auditing firms point to higher odds of a $16,000 Bitcoin retest.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Total crypto market cap takes another hit, but traders remain neutral

December 16, 2022 Coin Telegraph

audit

The total crypto market cap is at risk of falling below $825 billion, but data shows traders actively adding to their longs and shorts.

The total cryptocurrency market capitalization dropped 8.1% in the past two days after failing to break the $880 billion resistance on Dec. 14.

The rejection did not invalidate the 4-week-long ascending channel, but a weekly close below $825 billion will confirm a shift to the lower band and reduce the support level to $790 billion.

*Total crypto market cap in USD, 12-hour. Source: TradingView*

The overall investor sentiment toward the market remains bearish, and year-to-date losses amount to 66%. Despite this, Bitcoin (BTC) price dropped a mere 2% on the week, down to the $16,800 level at 17:00 UTC on Dec. 16.

A far different scenario emerged for altcoins which are being pressured by pending regulation and fears that major exchanges and miners could be insolvent . This explains why the total market capitalization had dropped by 4.7% since Dec. 9.

According to court documents filed on Dec. 15, a United States Trustee announced the committee responsible for part of FTX's bankruptcy proceedings. Among those is Wintermute Asia, a leading market maker and GGC International, an affiliate of the troubled lending platform Genesis. Investors remain in the dark about who the biggest creditors from the failed FTX exchange group are and this is fueling speculation that contagion could continue to spread.

On Dec. 15, The central bank of the Netherlands issued a warning to investors using KuCoin, saying the exchange was operating without legal registration. De Nederlandsche Bank added that the crypto firm was "illegally offering services" and "illegally offering custodian wallets" for users.

Adding to the drama, on Dec. 16, Mazars Group, a company known for its proof-of-reserve audit services for crypto companies, reportedly removed recent documents that detail exchange audits from its website. The firm was previously appointed as an official auditor for Binance's proof-of-reserve updates, a movement that was followed by Kucoin and Crypto.com.

The Bitcoin mining sector has also suffered due to the strong correction in cryptocurrency prices and rising energy costs. Publicly-listed miner Core Scientific was offered a $72 million contingent emergency credit line to avoid bankruptcy. The financial lender requires suspension of all payments to Core Scientific's equipment lenders while Bitcoin remains below $18,500.

The 4.7% weekly drop in total market capitalization was impacted mainly by Ether's (ETH) 5.4% negative price move and BNB, which traded down 15.1%. Consequently, the bearish sentiment significantly impacted altcoins, with 14 of the top 80 coins dropping 12% or more in the period.

*Weekly winners and losers among the top 80 coins. Source: Nomics*

The Open Network (TON) gained 30% after Telegram launched bidding for anonymous phone numbers sold for TON tokens.

Bitcoin SV (BSV) rallied 11.7% after Craig Wright, the self-proclaimed Satoshi Nakamoto and leader of the altcoin project, appealed to his loss in Norway courts.

Trust Wallet (TWT) saw a 27.2% correction after its parent company (Binance) faced $1.9 billion in withdrawals in 24 hours.

Leverage demand is balanced between bulls and bears

Currently, data shows demand for leverage is split between bulls and bears.

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

*Perpetual futures accumulated 7-day funding rate on Dec. 16. Source: Coinglass*

The 7-day funding rate was near zero for Bitcoin and altcoins, meaning the data points to a balanced demand between leverage longs (buyers) and shorts (sellers) in the period.

Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.

The options put/call volume reflects a neutral market

Traders can gauge the market's overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and this is bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.

*BTC options volume put-to-call ratio. Source: laevitas.ch*

Even though Bitcoin's price failed to break the $18,000 resistance on Dec. 14, there was no excessive demand for downside protection using options. More precisely, the indicator has been below 1.00, so slightly optimistic, since Dec. 12.

Presently, the put-to-call volume ratio stands near 0.88 because the options market is more strongly populated by neutral-to-bullish strategies which favors call (buy) options by 12%.

Derivatives markets are neutral, but the newsflow is negative

Despite the substantial weekly price decline in a handful of altcoins and the 4.7% drop in total market capitalization, derivatives metrics reflect no signs of panic.

There has been a balanced demand for longs and shorts using futures contracts. As a result, the BTC options risk assessment metric remains favorable even after Bitcoin's 8.5% correction following the $18,370 high on Dec. 14.

Ultimately, bulls should not expect the $825 billion market capitalization to hold, which does not necessarily mean an immediate retest of the $790 billion support.

Currently, the lower band of the ascending channel continues to exert upward pressure, but the newsflow looks favorable for bears.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin Santa Claus rally unlikely, according to on-chain and derivatives data

December 15, 2022 Coin Telegraph

bitcoin options

Data suggests that BTC’s rally to $18,300 is the only Santa Claus rally Bitcoin will see before the year ends.

As the coldest days of the crypto winter set in, investors’ speculative interest in the crypto market has fallen to pre-2021 levels, impairing the chance of a substantial directional price move. However, there’s a possibility of a bear market rally akin to the July through August 2022 uptrend.

The market enters a state of limbo

The FTX implosion impacted over 5 million users globally and adversely affected numerous crypto companies that were exposed to it. The industry is currently in a recovery mode and Cumberland, a U.S.-based crypto market broker, recently echoed this narrative in a tweet. The firm noted that "dozens of crypto companies are either severely curtailed or out of business, and the industry's future is as cloudy as ever."

Data suggests that building a sustainable bullish move will be challenging because the market is pushed back to a low liquidity and volatility regime.

Crypto analytics firm, Glassnode, reported “depressing” futures volumes for Bitcoin and Ethereum, tracing back to pre-2021 levels when Bitcoin’s price surpassed $20,000 for the first time.

*Bitcoin (orange) and Ethereum (blue) futures trading volume. Source: Glassnode*

The open interest volume of Bitcoin and Ethereum futures has dropped significantly toward mid-2022 levels, which was after the collapse of Luna-UST. The BTC and ETH leverage ratio indicator, which measures the ratio between open interest volume, is currently down to 2.5% and 3.1%.

Bitcoin’s spot trading volumes on crypto exchanges have also dipped significantly toward 2020 lows. Data from Blockchain.com shows that the 7-day moving average of exchange trading volume has dropped to $67 million, compared to $1.4 billion near the peak of the 2021 bull market.

*Bitcoin spot exchange trading volume. Source: Blockchain.com*

Due to low liquidity and a cloud of uncertainty over the market, there’s a strong possibility that the bear market is far from over. The realized volatility of Bitcoin has also dropped toward two-year lows of 22% (1-week), and 28% (2-weeks).

Moving forward, volatility may remain dull, with more sideways or slow downside price action. However, there’s still a chance of a short-term bear market rally.

Is a Bitcoin price pump and dump in play?

November’s FTX-induced shakeout was similar to the LUNA-UST implosion seen in June and these events usually cause panic selling and make an asset attractive to bargain hunters looking to buy into a capitulation.

Consequently, a short-term bull rally takes effect that may last a few days or weeks, which is precisely what happened in July through August when Bitcoin's price surged toward $25,000. Based on the shakeout levels from November and signs of institutional buying, Bitcoin might be undergoing a similar bear market rally.

The realized profit and loss metric of long-term holders dropped toward all-time lows, indicating possible oversold conditions. The long-term holder realized losses had reached comparable levels only during the 2015 and 2018 bottom.

*Profit and loss by return bands. Source: Glassnode*

Additionally, the futures market is currently in backwardation, meaning there are more open short positions than long. Throughout Bitcoin’s history, similar conditions have lasted for short periods only and ended up in a short-term pump to squeeze the short orders.

*BTC futures market swaps vs. 3 month rolling basis. Source: Glassnode*

The accumulation trend among institutions and whales, which had been negative for most of this year, turned positive in mid-November. An Increase in holdings of these investor cohorts provided a tailwind for the bear market rally in the third quarter of this year.

CoinShares reported that Institutional Bitcoin investment vehicles saw inflows totaling $108 million after the FTX implosion, with $17 million added last week. Notably, the present inflows are significantly lower than weeks 25 and 35 this year, which caused the uptrend toward $25,000.

*Weekly asset flow metrics from institutional BTC investment products. Source: Coin Shares*

On-chain data from Glassnode also shows positive accumulation among Bitcoin whales, identified as addresses holding greater than or equal to 100 BTC (worth around $1.7 million at current prices).

While the holdings of these whales has increased from its yearly lows in a similar fashion seen in July to August, BTC price has yet to reflect this positive addition.

*Holdings of BTC addresses with greater or equal to 100 BTC. Source: Glassnode*

Technically, the support and resistance levels of the previous trading range between $18,700 and $22,000 could form the local top levels of the current rally. Conversely, if BTC builds support above $22,000, the bear market rally could become more meaningful with a continued uptrend.

*BTC/USD 1-day chart. Source: TradingView*

However, the chances of a bullish rally above $22,000 are feeble due to low liquidity and the cloud of uncertainty that will motivate selling as prices rise. Still, discounting a short-term bear market rally can punish late sellers.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin retraces intraday gains as bears aim to pin BTC price under $18K

December 14, 2022 Coin Telegraph

Bitcoin retraces intraday gains as bears aim to pin BTC price under K

Coin Telegraph

BTC bears are positioned to profit from this week’s Bitcoin options expiry, especially if price stays below $18,000.

On Dec. 14, Bitcoin (BTC) broke above $18,000 for the first time in 34 days, marking a 16.5% gain from the $15,500 low on Nov. 21. The move followed a 3% gain in the S&P 500 futures in 3 days, which reclaimed the critical 4,000 points support.

*Bitcoin/USD index (orange, left) vs. S&P 500 futures (right). Source: TradingView*

While BTC price started the day in favor of bulls, investors anxiously awaited the U.S. Federal Reserve Committee's decision on interest rates, along with Fed chair Jerome Powell's remarks. The subsequent 0.50% hike and Powell’s explanation of why the Fed would stay the course of its current policy gave investors good reason to doubt that BTC price will hold its current gains leading into the $370 million options expiry on Dec. 16.

Analysts and traders expect some form of softening in the macroeconomic tightening movement. For those unfamiliar, the Federal Reserve has previously increased its balance sheet from $4.16 trillion in February 2020 to a staggering $8.9 trillion in February 2022.

Since that peak, the monetary authority has been trying to unload debt instruments and exchange-traded funds (ETFs), a process known as tapering. However, the previous five months resulted in less than $360 billion of assets decline.

Until there's a clearer guide on the economic policies of the world's largest economy, Bitcoin traders are likely to remain skeptical of a sustained price movement, regardless of the direction.

Bears placed most of their bets below $16,500

The open interest for the Dec. 16 options expiry is $370 million, but the actual figure will be lower since bears were caught off-guard after the move to $18,000 on Dec. 14. These traders completely missed the mark by placing bearish bets between $11,000 and $16,500, which seems unlikely given the market conditions.

*Bitcoin options aggregate open interest for Dec. 16. Source: CoinGlass*

The 0.94 call-to-put ratio shows a balance between the $180 million call (buy) open interest against the $190 million put (sell) options. Nevertheless, as Bitcoin stands near $18,000, most bearish bets will likely become worthless.

If Bitcoin remains above $18,000 at 8:00 am UTC on Dec. 16, virtually none of these put (sell) options will be available. This difference happens because a right to sell Bitcoin at $17,000 or $18,000 is worthless if BTC trades above that level on expiry.

Bulls can profit up to $155 million

Below are the four most likely scenarios based on the current price action. The number of Bitcoin options contracts available on Dec. 16 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $16,500 and $17,500: 1,400 calls vs. 1,200 puts. The net result is balanced between calls and puts.
Between $17,500 and $18,000: 3,700 calls vs. 100 puts. The net result favors the call (bull) instruments by $60 million.
Between $18,000 and $19,000: 6,200 calls vs. 0 puts. The net result favors the call (bull) instruments by $115 million.
Between $19,000 and $19,500: 8,100 calls vs. 0 puts. The net result favors the call (bull) instruments by $155 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there's no easy way to estimate this effect.

FTX contagion continues to impact markets

During bear markets, it's easier to negatively impact Bitcoin price due to the tone of newsflow and its outsized effect on the crypto market.

Recent negative crypto news includes reporting on a U.S. court filing that showed an "unfair" trading advantage for Alameda Research, the market-making and trading company associated with the bankrupt exchange FTX.

The U.S. Commodities Futures Trading Commission alleges that Alameda Research had faster trading execution times and an exemption from the exchange's "auto-liquidation risk management process."

Leading into Dec. 16, the bulls' best-case scenario requires a pump above $19,000 to extend their gains to $155 million. This seems improbable considering the lingering regulatory and contagion risks. For now, bears will likely be able to pressure BTC below $18,000 and avoid a higher loss.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ethereum rallies to $1,350, but derivatives metrics remain neutral to bearish

December 13, 2022 Coin Telegraph

Ethereum rallies to ,350, but derivatives metrics remain neutral to bearish

Binance

Pro traders aren’t buying ETH’s recent rally to $1,350 and data shows they expect Ether price to retrace if Fed chair Powell takes a hawkish tone on Wednesday.

Ether (ETH) rallied 6.3% to $1,350 on Dec. 13, mimicking a similar failed attempt that took place on Nov. 10. Despite reaching the highest level in 33 days, the gains were not enough to instill confidence in traders according to two key derivatives metrics.

Bulls' frustrations can partially be explained by Binance exchange facing a near-record $1.1 billion in withdrawals over a 24-hour period. The unusual behavior comes as Binance attempts to put out multiple disputes about its proof of reserves and overall solvency on crypto Twitter. According to Binance CEO, Changpeng Zhao, the social media posts amount to nothing more than FUD.

However, Binance's USD Coin (USDC) reserves were emptied after alleged troubles with commercial banking hours.

The negative newsflow continued on Dec. 13, as the United States Securities and Exchange Commission (SEC) filed charges against Sam Bankman-Fried, the former CEO of now-bankrupt FTX crypto exchange. The fresh charges come just a day after his arrest by Bahamian authorities at the request of the U.S. government.

On Dec. 13, the United States Commodity Futures Trading Commission (CFTC) also filed a lawsuit against Sam Bankman-Fried, FTX and Alameda Research, claiming violations of the Commodity Exchange Act and it demanded a jury trial.

Traders are relieved that Ether is trading above the $1,300 level, but the rebound has been mostly driven by the Consumer Price Index (CPI) print for November at 7.1% year-on-year, which was a tad bit softer than expected. More importantly, the U.S. Federal Reserve (FED) is expected to decide on the interest rate hike on Dec. 14 and analysts expect the size of rate hikes to decline now that inflation appears to have peaked.

Consequently, investors believe that Ether could retrace its recent gains if comments Federal Reserve Chair Jerome Powell take a hawkish angle, a point highlighted by trader CryptoAceBTC:

Liquidity is low in market
And retracing quickly is only way to bring in buyers and sellers

I think Fed meet will be Hawkish and price will retrace this CPI pump

Bitcoin $18k $18.5k resistance
ETH $1350-$1400
Will wait for Fed meet to load shorts
— Cryptoce (@CryptoAceBTC) December 13, 2022

Let's look at Ether derivatives data to understand if the surprise pump positively impacted investors' sentiment.

The rally to $1,300 had a limited impact on confidence

The chart above shows that derivatives traders remain in "fear mode" because the Ether futures premium is below 0%, indicating the absence of leverage buyers' demand. Still, such data does not signal traders expect further adverse price action.

For this reason, traders should analyze Ether's options markets to understand whether investors are pricing higher odds of surprise negative price movements.

Options traders were on the verge of turning neutral

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

The delta skew improved considerably between Dec. 7 and Dec. 11, declining from a fearful 16% to a neutral balanced-risk options pricing at 9.5%. The movement signaled that options traders were more comfortable with downside risks. However, the situation changed on Dec. 13 after Ether failed to break the $1,350 resistance.

As the 60-day delta skew stands at 14%, whales and market makers are reluctant to offer downside protection, which seems odd, considering ETH is trading at the highest level in 32 days. Both options and futures markets point to pro traders fearing that the $1,300 resistance will not hold ahead of the FED meeting.

Currently, the odds favor Ether bears because the FTX exchange bankruptcy increased the possibility of stricter regulation and brought discomfort to cryptocurrency investors.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin traders cross fingers in hopes that a positive Fed meeting triggers a run to $18K

December 12, 2022 Coin Telegraph

Bitcoin traders cross fingers in hopes that a positive Fed meeting triggers a run to K

Asia

All eyes are on this week’s Federal Reserve meeting, and BTC traders hope that positive strides against inflation trigger a run to $18,000.

Bitcoin (BTC) failed to break above the $17,250 resistance on Dec. 11 and subsequently faced a 2.2% correction. More importantly, the last daily close above this level was over 30 days ago — reinforcing the thesis of size sellers near the $330 billion market capitalization mark.

Curiously, this valuation level is slightly behind Palladium, the world's 23rd most valuable traded asset with a $342 billion capitalization. So from one side, Bitcoin bulls have some reasons to celebrate because the price recovered 10% from the $15,500 low on Nov. 21, but bears still have the upper hand on a larger time frame since BTC is down 64% year-to-date.

Two events are expected to determine traditional finance investors' fate, as the United States consumer price index is expected onDec. 13 and U.S. Federal Reserve chair Jerome Powell will announce the size of the next interest rate hike on Dec. 14. Powell’s press conference will also be anxiously awaited by investors.

In the cryptocurrency markets, there is mild relief stemming from exchanges' proof of reserves, although several analysts have criticized the limited details of each report.

Derivatives exchange Bybit was the latest addition to the transparency initiative, allowing users to self-verify their deposits using Merkle Trees, according to a Dec. 12 announcement.

However, regulatory risks remain high after U.S. Democrat Senator and crypto-skeptic Jon Tester boldly stated that he sees "no reason why" crypto should exist. During a Dec. 11 appearance on NBC, Tester argued that crypto has no real value, so regulating the sector would give it legitimacy.

Lastly, according to Reuters, the U.S. Department of Justice (DOJ) is nearing the completion of its investigation into Binanceexchange, which started in 2018. The Dec. 12 report suggests a conflict among prosecutors on whether the evidence is enough to pursue criminal charges.

Let's look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

The Asia-based stablecoin premium drops to 2-month low

The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100% and during bearish markets the stablecoin's market offer is flooded, causing a 4% or higher discount.

Currently, the USDC premium stands at 99%, down from 102.5% on Dec. 3, indicating lesser demand for stablecoin buying from Asian investors. The data gains relevance after the multiple failed attempts to break above the $17,250 resistance.

However, this data should not necessarily be bearish because the stablecoin position could have been converted for fiat (cashed out) solely due to counterparty risks — meaning investors withdrew from exchanges.

Leverage buyers ignored the failed resistance break

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

Even though Bitcoin failed to break the $17,250 resistance, professional traders have kept their leverage long positions unchanged according to the long-to-short indicator.

For instance, the ratio for Binance traders slightly declined from 1.08 on Dec. 5 to the current 1.05 level. Meanwhile, Huobi displayed a modest decrease in its long-to-short ratio, with the indicator moving from 1.04 to 1.02 in the seven days until Dec. 12.

Yet, at OKX exchange, the metric increased from 1.04 on Dec. 5 to the current 1.07 ratio. So, on average, traders have kept their leverage ratio during the week which is encouraging data considering the lackluster price action.

Bitcoin’s $17,250 resistance is losing strength

There's an old saying: "if a support or resistance keeps getting tested, it is likely to become weaker." Currently, the stablecoin premium and top traders' long-to-short — suggest that leverage buyers are not backing despite the multiple failures to break above $17,250 in December.

Even though the Asian stablecoin premium is no longer present, the 1% discount is not enough to signal discomfort or distressed sellers. Furthermore, the top traders' long-to-short ratio stood flat versus the previous week.

The data from those two markets supports the thesis of Bitcoin breaking above $17,250 as long as the U.S. FED meeting on Dec. 14 signals that the interest rate hikes are nearing an end. If this were the case, investors’ bearish sentiment could be extinguished because bears will become less confident, especially if Bitcoin price holds the $17,000 level.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

derivatives

Most bullish bets targeted $20,000 or higher

Bears could secure a $340 million profit

Bitcoin price retreats to channel support

Bitcoin futures are back to backwardation

Top traders unwilling to let go of their longs

Strength of $16,800 support is a bullish indicator

The recent bounce above $1,200 did not instill bullishness

Options traders not keen on offering downside protection

The Asia-based stablecoin premium drops to 2-month low

Leverage buyers slowly thrown in the towel

A potential retest of $16,000 is likely in the making

Leverage demand is balanced between bulls and bears

The options put/call volume reflects a neutral market

Derivatives markets are neutral, but the newsflow is negative

The market enters a state of limbo

Is a Bitcoin price pump and dump in play?

Bears placed most of their bets below $16,500

Bulls can profit up to $155 million

FTX contagion continues to impact markets

The rally to $1,300 had a limited impact on confidence

Options traders were on the verge of turning neutral

The Asia-based stablecoin premium drops to 2-month low

Leverage buyers ignored the failed resistance break

Bitcoin’s $17,250 resistance is losing strength

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