The recent rejection of Bitcoin for $ 12,400 led to a $ 234 million futures contract liquidation on the futures exchanges. Despite up by 30% in the past 30 days, it did not decide to hold the $ 11,700 level for support.
Bitcoin (BTC) has not seen its lowest since declining 50% in mid-March, causing the price to test the level below $ 4,000.
Certainly there have been ups and downs in the last three weeks, although there has been a clear uptrend. Trader sentiment was certainly not positive on August 2 after the $ 1,400 crash that liquidated $ 1 billion in futures contracts.
It is natural for the human mind to add more significance to recent events, especially when presenting a negative outcome.
No doubt, leveraged traders will have a more painful experience when faced with such unexpected large red candles in long uptrends.
A measure of financial leverage based on the financing rate
Excessive influence from buyers will be reflected in the financing rate. This is because permanent futures contracts, also known as reverse swaps, have a built-in fee for using margin.
Funding rates are usually changed every 8 hours, ensuring that there are no imbalances in excessive exposure to exchange rate risk.
When the buyers use more leverage than the sellers, the funding rate is positive and the buyers pay. The opposite is true when sellers of futures contracts require a higher margin.
After a brief positive spike on August 10, the funding rate was relatively calm over the next seven days. The trend changed earlier this week when the index reached 0.10%, i.e. 2% for the week.
This does not necessarily lead to the rise of investors, but it does indicate that buyers are using more leverage.
Options markets are showing few signs of tension
Volatility is the main measure of price volatility and can be calculated using either historical prices or using options market prices known as implied volatility. This means that regardless of the daily volatility of the last week or the last month, the implied volatility measures the current scenario.
Only bitcoin options are used whose strike is closest to the current underlying market level, i.e. currently $ 11,000 to $ 13,000. These options are known as money options and are used to calculate implied volatility.
Notice how the pointer has barely moved over the past 48 hours. This would definitely not be the case if the market suddenly fell by $ 2,000. This confirms the hypothesis that the current bitcoin correction is a healthier downturn than a trend-changing market movement.
Top traders stay for a long time
The data provided by the exchange sheds light on traders’ net long-to-short positions, making it possible to determine whether professional traders are bullish or bearish.
Despite methodological discrepancies, viewers can monitor changes in this indicator and get an adequate overview of the net exposure of the top traders.
All in all, traders at Binance and OKEx have had long net exposure since July 27, and not even the sharp drop in Bitcoin’s price of $ 1,500 on August 2 could alter this bullish stance.
Bitcoin analysts became more optimistic after the Federal Reserve reportedly considered not raising interest rates until inflation reached 2%.
Size is still going strong
Volume changes provide information about the increase and decrease in activity, especially after strong price movements.
Trading volume across the cryptocurrency market saw a downward trend as the total market value drifted aside near $ 260 billion from mid-May to late July and finally broke the $ 280 billion resistance.
While it remains to be seen whether the recent total market capitalization will reach the $ 360 billion level, the current average volume for 10 days is an indication of a healthy market direction.
There does not appear to be a pressure signal on Bitcoin futures or options, as both the perpetual contract financing and implied volatility indicators remain intact.
Although there is no single indicator or analysis that provides certainty about short-term price movements, the net exposure of the major traders indicates an unaffected upward momentum.