Bitcoin price falls under $19K as data shows pro traders avoiding leverage longs

An $860 surprise price correction on Sept. 6 took Bitcoin (BTC) from $19,820 to $18,960 in less than two hours. The movement caused $74 million in Bitcoin futures liquidations at derivatives exchanges, the largest in almost three weeks. The current $18,733 level is the lowest since July 13 and marks a 24% correction from the rally to $25,000 on Aug. 15.

6cfa5550 cbf3 4ea9 ac42 2bf5ceffce48
Bitcoin/USD 30-min price. Source: TradingView

It is worth highlighting that a 2% pump toward $20,200 happened in the early hours of Sept. 6, but the move was quickly subdued and Bitcoin resumed trading near $19,800 within the hour. Ether’s (ETH) price action was more interesting, gaining 7% in the 48 hours preceding the market correction.

Any conspiracy theories regarding investors changing their position to favor the altcoin can be dismissed as Ether dropped 5.6% on Sept. 6, while Bitcoin’s $860 loss represents a 3.8% change.

The market has been in a bit of a rut since Aug. 27 comments from U.S. Federal Reserve Chair Jerome Powell was followed by a $1.25 trillion loss in U.S. stocks in a single day. At the annual Jackson Hole Economic Symposium, Powell said that larger interest rate hikes were still firmly on the table, causing the S&P 500 to close down 3.4% that day.

READ:   Bitcoin tops $22,000, hitting highest in nearly a month ahead of inflation data and Ethereum merge

Let’s take a look at crypto derivatives data to understand whether investors have been pricing higher odds of a downturn.

Pro traders have been bearish since last week

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the fluctuation of funding rates that often occurs in a perpetual futures contract.

c5aeadde 9173 4a8f 89b2 64d04bbe0b18
Bitcoin 3-month futures annualized premium. Source: Laevitas

In healthy markets, the indicator should trade at a 4% to 8% annualized premium to cover costs and associated risks. So one can safely say that derivatives traders had been neutral to bearish for the past month because the Bitcoin futures premium remained below 3% the entire time. This data reflects professional traders’ unwillingness to add leveraged long (bull) positions.

One must also analyze the Bitcoin options markets to exclude externalities specific to the futures instrument. For example, the 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

READ:   Adelaide–Alice Springs economy fares double since April
d6d6d308 2949 475d 895e 8c9eb0360aac
Bitcoin 30-day options 25% delta skew: Source: Laevitas

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%. On the other hand, bullish markets tend to drive the skew indicator below negative 12%, meaning the bearish put options are discounted.

The 30-day delta skew had been above the 12% threshold since Sept 1, signaling options traders were less inclined to offer downside protection. These two derivatives metrics suggest that the Bitcoin price dump on Sept. 6 might have been partially expected, which explains the low impact on liquidations.

In comparison, the $2,500 Bitcoin drop on Aug. 18 caused $210 million worth of leveraged long (buyers) liquidations. Still, the prevailing bearish sentiment does not necessarily translate to adverse price action. Therefore, one should tread carefully when whales and market markers are less inclined to add leverage longs and offer downside protection using options.

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.

(Visited 1 times, 1 visits today)

Only authentic Gist, News and Gossips around Nigeria.

Related Posts

dnata-and-menzies-deal-averts-industrial-action

Dnata and Menzies deal averts industrial action

Dnata catering staff and Menzies ground handlers have called off a vote on industrial action after securing pay rises and job security protections. The TWU’s national secretary, Michael Kaine, said the raise and improvements to job security would make a “huge difference” to workers who’ve been under “immense financial pressure”. The news also averts any

‘i-accept-being-ordinary’:-china’s-youth-are-turning-their-backs-on-hustle-culture

‘I accept being ordinary’: China’s youth are turning their backs on hustle culture

Crystal Guo says she typically works for about six months to a year before quitting.It’s what the 30-year-old describes as her new lifestyle of “intermittent working and persistent lying flat.” Young people in China are growing disillusioned and frustrated with work and life, and some are now turning their backs on a crushing hustle culture as

austin-remembers-prisoners-of-war,-service-members-deemed-missing-in-action

Austin Remembers Prisoners of War, Service Members Deemed Missing in Action

Secretary of Defense Lloyd J. Austin III met today at the Pentagon with former prisoners of war, families of military members missing in action and staff from embassies of nations. The DOD works with these groups to account for missing American personnel and commemorate National POW/MIA Recognition Day. “Every year on National POW/MIA Recognition Day

wallets-like-metamask-need-to-become-more-user-friendly

Wallets like MetaMask need to become more user-friendly

After Ethereum’s long-awaited Merge, it’s an ideal time to think about how we can also improve smart contracts. Essentially apps that run on blockchains, smart contracts are a vital component of our Web3 applications. But interacting with them remains quite dangerous, especially for non-developers. Many of the incidents where users lose their crypto assets are

air-new-zealand-to-receive-first-saf-shipment

Air New Zealand to receive first SAF shipment

A three-year-old Air New Zealand A321, ZK-NNB, as shot by Victor Pody Air New Zealand will next week receive its first shipment of sustainable aviation fuel derived from used cooking oil. The 1.2 million litre delivery, equivalent to fuelling 400 return flights between Auckland and Wellington, will be used to test the supply chain to

biden-white-house-just-put-out-a-framework-on-regulating-crypto-—-here’s-what’s-in-it

Biden White House just put out a framework on regulating crypto — here’s what’s in it

U.S. President Joe Biden walks from Marine One to the White House following a trip from Michigan, in Washington, U.S., September 14, 2022. Tom Brenner | ReutersThe Biden White House has just released its first-ever framework on what crypto regulation in the U.S. should look like — including ways in which the financial services industry should

Leave a Reply

Your email address will not be published.