The move liquidated long (bullish) positions worth $ 285 million, leading some traders to predict a potential downside of $ 13,800.
What an exciting time to be alive! Love the volatility these elites are creating! They really want to buy LOW before the next bullish cycle! Thank goodness we were ready months in advance!
– JD (@ jaydee_757) November 14, 2022
As described by independent market analyst Jaydee_757, the downtrend continues to exert its pressure, with $ 17,200 as the resistance level. However, this analysis does not provide any guarantee that the final low of $ 13,800 will be reached.
Curiously, the price action coincided with improving conditions for global equity markets on October 4, as the S&P 500 index gained 6.4% between November 10 and November 11, and the Nasdaq Composite. heavily technological, it gained 9.5%. So, at least from a technical point of view, Bitcoin has completely decoupled from traditional finance.
Further uncertainty about Bitcoin was caused by Grayscale Bitcoin Trust shares trading on over-the-counter equity markets after the fund’s $ 11.4 billion discount on its assets exceeded 40%.
looking at GBTC liquidity and lenders’ exposure to said product for contagion risk
it looks like someone is selling a lot of GBTCs
the discount is now> 40% and rising, the implied price of BTC is $ 9,000 and many GBTCs are located in toxic atm places
– Vance Spencer (@pitismo) November 11, 2022
As noted by Vance Spencer, the implied price of BTC according to the trading of the funds is less than $ 9,000 and the pressure should continue if some holders use their shares as collateral for loans.
However, the negative sentiment that led to Bitcoin dipping below $ 20,000 does not mean that professional investors are bearish at current price levels.
Margin traders did not close their longs
Monitoring the margin and options markets provides excellent insight into how professional traders are positioned, allowing investors to borrow cryptocurrency to leverage their trading position.
For example, you can increase your exposure by borrowing stablecoins to buy an additional position in Bitcoin. On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its falling price. Unlike futures contracts, the balance between long and short margins is not always matched.
The chart above shows that the OKX Traders Margin Lending Ratio increased from November 8-10, signaling that traders did not close their long positions on leverage despite the 25.4% price correction.
Furthermore, the metric continues to favor stablecoin lending by a large margin, indicating that traders have maintained bullish positions.
The options markets have returned to the downside
Traders should scan options markets to see if Bitcoin can claim support of $ 18,500. The 25% delta skew is a significant signal whenever arbitrage desks and market makers are overloading upside or downside protection.
The indicator compares similar call (buy) and put (sell) options and will turn positive when fear prevails because the protective premium of put options is higher than risk call options.
The skew indicator will move above 10% if traders fear a drop in the price of Bitcoin. On the other hand, generalized arousal reflects a 10% negative slope.
As shown above, the 25% skew delta had been below 10% since October 26, but quickly moved above that threshold on November 8, suggesting that options traders were assessing a greater risk of unexpected dumping of stocks. prices.
Whenever this metric exceeds 10%, it signals that traders are fearful and reflects the lack of interest in offering downside protection.
Related: Crypto.com CRO is in trouble, but a 50% price bounce is at stake.
The FUD layoff doesn’t happen overnight
Despite the bearish Bitcoin options indicator, the OKX margin lending rate showed that whales and market makers hold bullish bets. The fear of contagion could explain the mixed feeling as investors struggle to interpret the recent movements of the Crypto.com exchange, including an “accidental” transfer of 320,000 Ether (ETH) to Gate.io.
Execution on Crypto com begins after the collapse of FTX. Investors have begun withdrawing funds from the Singapore-based cryptocurrency exchange in a sign that the dramatic FTX collapse is sparking contagion among exchanges. Cronos, the token behind the Crypto com business, has crashed. https://t.co/evk4J1vnnL pic.twitter.com/wMJmvch2D0
– Holger Zschaepitz (@Schuldensuehner) November 14, 2022
Analyst Holger Zschaepitz’s post describes the current sentiment of investors as reluctant to take risks on centralized exchanges offering similar products and services since the now failed FTX.
As a result, derivatives are reflecting low confidence in regaining support of $ 18,500 until further data shows that the liquidity of the cryptocurrency ecosystem has been restored.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move carries risk, you should conduct your research when making a decision.