Bitcoin Bullish Despite Market Fluctuations: Future Predicted Above $50,000
Summary:
Despite Bitcoin price trading under $42,000, it's possible that the cryptocurrency could reach and even surpass $50,000, according to market predictions. Optimism remains among traders even after a 6.9% dip. The recent liquidation of leveraged long Bitcoin futures triggered a 7% correction, but Bitcoin's value saw a 4.2% increase in the subsequent six trading hours. The BTC futures premium demonstrated resilience throughout, contributing to a balanced cost between call and put options. Disorders in the spot market seems responsible for the recent price fluctuations. Despite corrections in price, derivatives indicate the maintenance of positive momentum.
Despite Bitcoin not yet surpassing its 2023 peak and hovering under the substantial hurdle of $44,000, hope remains for the cryptocurrency to reach and exceed $50,000. Even though Bitcoin currently sits under $42,000, market predictions are signaling an upward spike. Evidently, Bitcoin derivative metrics reveal an unwavering sense of optimism among traders, in spite of a recent 6.9% dip. The doubt lies in whether optimism could stimulate further increase.
On December 11th, there was a liquidation of leveraged long Bitcoin futures amounting to $127 million. Though it might appear substantial, it constitutes less than 1% of total open interest which represents the value of all outstanding contracts. It's undeniable that this triggered a 7% correction within a twenty-minute window.
It could be debated that derivatives markets significantly influenced this downward price trend. This viewpoint fails to consider that post the December 11th drop to $40,200, Bitcoin's value saw a 4.2% increase in the subsequent six trading hours. This implies that large-scale liquidation orders lost their edge long ago, thus quashing beliefs of a crash steered solely by futures markets.
To gauge if influential Bitcoin players still maintain a bullish outlook, focus should be on the Bitcoin futures premium or the basis rate. Noted among professional traders and their preference for fixed-rate monthly contracts, this indicator in neutral markets typically offers a premium between 5% to 10%, compensating for extended settlement timeframes.
Interestingly, on December 11th, the BTC futures premium demonstrated resilience amid a 9% dip in intraday price, consistently keeping above the neutral-to-bullish 10% mark. A substantial surge in shorts would have lowered the metric to the neutral range of 5% to 10%.
Likewise, the options markets can provide insight into investor optimism following recent corrections. A key indicator to watch is the 25% delta skew, which reveals whether arbitrage desks and market makers are substantially charging for protection against price rises or falls.
A skew metric above 7% suggests a bitcoin price fall is anticipated, while periods of heightened enthusiasm often result in a negative 7% skew. The BTC options skew has remained neutral since December 5th, exhibiting an equal cost between call (buy) and put (sell) options. While this is not as hopeful as the preceding fortnight when put option traded at a 10% discount, resilience seems evident after a 6.1% correction since December 10th.
As for retail traders, their sentiment appears to lean towards neutrality to bullishness despite Bitcoin’s inconsistent performance. Evidence lies in perpetual contracts or inverse swaps which embed a rate recalculated every eight hours. An uptick in demand among long positions corresponds with a positive funding rate, as demonstrated by a minor increase between December 8th to December 10th at 0.045%. This equates to 0.9 % weekly and hence is not burdensome for traders to uphold their positions.
Considering Bitcoin's 52% surge since October, these numbers reflect a healthy scenario. It suggests that the rally followed by liquidations was not propelled by over-leveraged retail longs. The thrust to $44,700 and subsequent plunge to the current $41,300 seem to be influenced primarily by the spot market. It doesn’t necessarily mean a recovery has begun, but it considerably curtails the prospect of more liquidations due to undue hopes of a spot exchange-traded fund (ETF) approval.
Ultimately, Bitcoin bulls can feel some degree of comfort as derivatives indicate the upkeep of positive momentum amid corrections in price. However, this article is not an endorsement or advice for investing or trading. Such decisions carry certain risks and thus should be made after due diligence and research.
Published At
12/13/2023 12:47:35 AM
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