Bitcoin Drops Below $35,000 Amid Concerns Over Heated Derivatives Market
Summary:
Bitcoin (BTC) fell below $35,000 subsequent to the Wall Street open on Nov. 2 due to concerns about an overheated derivatives market. After climbing to new 18-month highs, the cryptocurrency saw a retracement which continued to move forward. The Federal Open Market Committee maintained the interest rates, resulting in a shift of responsibility to the spot markets to maintain BTC's price strength. Some financial authorities and traders pointed out the need for caution in the current Bitcoin trading environment, especially due to the potential rapid disappearance of support levels, a situation known as a 'rug pull'.
The highly popular cryptocurrency, Bitcoin (BTC) has dropped below the $35,000 level following the commencement of trading at Wall Street on November 2. Analysts are expressing concerns about an overheated derivatives market. BTC/USD 1-hour chart from TradingView indicates BTC's price pulling back, negating the recent gains the coin had made.
The cryptocurrency leader had recently marked a fresh 18-month peak hitting $35,968 on Bitstamp before retreating. This retreat was actively ongoing at press time. This incline followed Jerome Powell, the Chair of the U.S. Federal Reserve’s, optimistic remarks hinting that interest rate increases might soon be halted.
The Federal Open Market Committee (FOMC) chose not to alter rates in their recent meeting on November 1. The committee's review stated, "Robust economic expansion was indicated in third-quarter recent indicators, despite consistent but slow job gains compared to the year’s start. Inflation continues to maintain the record high, however, the unemployment rate has been held low."
As reported earlier by Cointelegraph, once the Bitcoin price had reached $35,000, it became a crucial support level for market players to maintain. The range above $34,500 was considered to be a perfect spot for a local low.
However, recently BTC price is at a decline, dropping more than $1,000 from its high, causing some jitters and pointing towards over-heated derivatives markets. Charles Edwards, founder of a quantitative Bitcoin and a digital asset fund named Capriole Investments, noted, "All Bitcoin derivatives markets are currently overheated." His cautionary note reminded traders of the overheating derivatives market including Perps, Futures, and Options.
Established trader Skew concurred, emphasizing that the responsibility to uphold the BTC price now fell onto the spot markets. He advised all to pay attention to their positions, as an overheated derivatives market could put a strain on the spot market to sustain current prices and trends.
In another analysis, the monitoring entity Material Indicators advised careful handling of Bitcoin's current trading conditions. It pointed out the probability of rapid disappearance of support levels, commonly known as a 'rug pull', on a snapshot of liquidity on the BTC/USDT order book for the global exchange leader, Binance.
Consequently, this narrative neither includes investment advice nor recommendations, as investments and trading movements involve risks, and hence, all readers should perform their own research before decision making.
Published At
11/2/2023 2:54:12 PM
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