“Don’t fight the trend” is an old saying in the market, and there are variations of other phrases, such as “Never catch a falling knife.” Most importantly, traders should not try to predict a trend reversal, or worse, try to increase the average price while losing money.
Whether it’s trading soybean futures, silver, stocks or cryptocurrencies, it really doesn’t matter. The market usually runs on a cyclical basis, which may last from a few days to several years. In Bitcoin (Bitcoin) Case, it is difficult for anyone to justify the bullish case by looking at the chart below.
In the past 25 days, every attempt to break through the descending channel has been abruptly interrupted.Strangely, the trend points to less than $40,000 in mid-October, which happens to be U.S. Securities and Exchange Commission Decision on ProShares Bitcoin ETF (October 18) and Invesco Bitcoin ETF (October 19).
according to CoinShares Weekly Report, The recent price trend triggered institutional investors to enter inflows for the sixth consecutive week. Between September 20 and September 24, there was an inflow of nearly 100 million U.S. dollars.
Experienced traders claim that Bitcoin needs to be recovered 43,600 USD support Resuming the bullish trend. At the same time, the data on the chain indicates a large amount of accumulation, as the decline in exchange supply has been dominant.
Perpetual futures show traders are neutral to bearish
In order to gauge investor sentiment, the financing rate of perpetual contracts should be analyzed, as these are the tools of choice for retail traders. Unlike monthly contracts, the trading prices of perpetual futures (reverse swaps) are very similar to regular spot exchanges.
When more leverage is needed, the longs (buyers) automatically charge the funding rate every eight hours. However, when the situation reverses and short positions (short positions) become over-leveraged, the interest rate on funds becomes negative and they become the people who pay the fees.
The “neutral” situation involves the long-leverage paying a small fee, which fluctuates from 0% to 0.03% every 8 hours, which is equivalent to 0.6% per week. However, the above chart shows a slightly bearish trend since September 13, when the financing interest rate was above the 0.03% threshold for the last time.
The put option ratio is good for bulls, but the trend has changed
Unlike futures contracts, options are divided into two parts. Call (buy) options allow the buyer to buy Bitcoin at a fixed price on the expiry date. Generally, these are used for neutral arbitrage trading or bullish strategies.
At the same time, put (sell) options are usually used as a protective measure to prevent negative price fluctuations.
To understand how these competitive forces are balanced, we should compare call options and put options on open positions.
This indicator reached a bottom of 0.47 on August 29, reflecting the superposition of a 50,000 BTC protective put option and a 104k BTC call (buy) option. Nevertheless, the gap has been narrowing due to the use of neutral to put option contracts after the monthly expiration on September 24.
According to the Bitcoin futures and options market, it seems premature to call it a “bearish” period, but the derivatives indicators of the past two weeks have absolutely no signs of bullishness. The hopes of the bulls seem to be pinned on the ETF deadline as a trigger to break the current market structure.
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