The first rule of Bitcoin (BTC) trading should be “expect the unexpected”. In the last year alone, there have been five cases of 20% or more daily gains and five intraday-intraday declines of 18%. To be honest, the volatility over the past 3 months has been relatively modest compared to the recent highs.
Bitcoin historical 90-day annualized volatility. Source: TradingView
Whether they’re multi-million dollar institutional fund managers or retail investors, traders new to Bitcoin are often intrigued by a 19% correction after a local high. Even more shocking to many is the fact that the current correction of $ 13,360 from the all-time high of November 10th to $ 69,000 was over nine days.
The downward movement did not trigger any alarmingly rising liquidations
Cryptocurrency traders are notorious for high leverage trading and in the past 4 days nearly $ 600 million worth of bitcoin futures contracts (purchase) have been liquidated. That might sound like a decent number, but it makes up less than 2% of the total BTC futures markets.
The aggregated open interest of Bitcoin futures. Source: Coinglass.com
The first evidence that the 19% decline to $ 56,000 marked a local low is the lack of a significant liquidation event despite the sharp price movement. Had excessive buyer leverage been involved, a sign of an unhealthy market, open interest would have shown an abrupt change, similar to the one on September 7th.
The risk assessment of the options markets remained calm
To determine how concerned professional traders are, investors should analyze the 25% delta skew. This indicator provides a reliable insight into the “fear and greed” mood by comparing similar call (buy) and put (sell) options side by side.
This metric becomes positive if the premium for neutral to bearish put options is higher than that of call options with a similar risk. This situation is usually thought of as a “fear” scenario. The opposite trend signals an upward trend or “greed”.
Bitcoin 30 Day Options 25% Delta Skew. Source: Laevitas.ch
Values between negative 7% and positive 7% are considered neutral, so nothing extraordinary h -pened in the most recent support test of $ 56,000. This indicator would have risen to over 10% had professional traders and arbitrage traders identified higher risks of a market coll -se.
Margin traders are still going long
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position and thus increase returns. For example, one can buy cryptocurrencies by borrowing Tether (USDT) and increasing their exposure. Bitcoin borrowers, on the other hand, can only short it as they are betting on the fall in price.
Unlike futures contracts, the balance between margin longs and shorts is not always the same.
OKEx USDT / BTC margin credit ratio. Source: OKEx
The gr -h above shows that traders have borrowed more USDT lately as the ratio rose from 7 on November 10 to 13 today. The data is trending bullish as the indicator favors stablecoins borrowing 13x, so this could reflect their positive exposure to the Bitcoin price.
All of the above indicators are showing resilience in the face of the recent BTC price drop. As mentioned, anything can h -pen in crypto, but derivative data suggests that $ 56,000 was the local low.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegr -h. Every investment and trading movement involves risks. You should do your own research when making a decision.