Bitcoin price gave back some of its recent gains this week, but multiple data points suggest that $30,000 should remain support going forward.
Bitcoin (BTC) stayed within a tight 4.3% range for the 15 days to July 7. Despite the closeness of the $29,895-$31,165 range, investor sentiment was significantly dented by an unsuccessful attempt to break above $31,400 on July 6th.
One reason for the short-term correction may be traders’ tendency to overreact to short-term price movements rather than Bitcoin’s 82% year-to-date gains. The same rationale applies to events related to other cryptocurrencies as well.
Investors are focused on whether the recent price increases are entirely due to multiple spot bitcoin exchange-traded fund (ETF) requests.
Other pressing developments include that Binance Chief Strategy Officer Patrick Hillman and other senior compliance officers reportedly exited the exchange on July 6 due to CEO Changpeng Zhao’s response to the U.S. Department of Justice investigation. On June 29, the crypto exchange also informed users that its euro banking payment gateway would be shutting down its services by September, potentially halting SEPA bank transfer deposits and withdrawals.
Meanwhile, on July 3, the yield curve reached its lowest inversion since 1981, reflecting the 2-year bond’s yield of 4.94%, compared to the 10-year bond’s yield, which trades at 3.86%, which is the opposite what you would expect from longer dated bonds . The phenomenon is closely watched by investors as it has caused recessions in the past.
All of these events are likely to have some impact on Bitcoin price and investor sentiment. Both topics are discussed in more detail below.
Traders are showing strength in the margin, options and futures markets
OKX stablecoin/BTC margin lending ratio. Source: OKX
The OKX margin lending indicator, which is based on the stablecoin/BTC ratio, has risen steadily, from 20x in favor of long positions on July 1st to the current 29x ratio on July 7th, reflecting growing confidence among alerts merchants using margin lending. However, it remains in a neutral to bullish zone, below the historical 30x line associated with overly optimistic sentiment.
Not only does the indicator leave room for further long leverage, but it also shows no signs of potential strain on margin markets in the event of a sudden bitcoin price correction.
Traders do not buy protective puts and do not increase their short positions
Traders can also assess market sentiment by measuring whether there is more activity via call (buy) options or put (sell) options. A put-to-call ratio of 0.70 indicates that open interest in put options is lagging the more bullish calls and is therefore bullish. In contrast, an indicator of 1.40 favors put options, which can be considered bearish.
BTC option volume put to call ratio. Source: Laevitas
The put-to-call ratio for bitcoin options volume has remained below 1.0 for the past three days, indicating a higher preference for neutral to bullish call options. Importantly, despite the brief correction in bitcoin price to $29,750 on July 7th, there was no significant increase in demand for protective put options.
The top traders’ net long-to-short ratio excludes externalities that may have solely impacted the options markets. There are occasional methodological discrepancies between different exchanges, so readers should focus on changes rather than absolute numbers.
Long to short ratio of the exchanges top traders. Source: CoinGlass
The long-to-short ratio for OKX’s top traders rose to 1.68 on July 7 from 0.52 on July 3, indicating strong demand for leveraged long positions, although Bitcoin failed to make it to break the $31,000 mark. On Binance, the indicator fell from 1.52 on July 3 to 1.39 on July 7, staying above its 1.33 average over the past 30 days, suggesting a neutral reading.
Related: Bitcoin mining stocks outperform BTC in 2023, but on-chain data suggests a potential stalemate
Bears will have a tough time as markets anticipate a possible ETF approval
Natalie Brunell, an award-winning Bitcoin TV journalist, podcast host and educator, spoke to Cointelegraph about how institutional investors are now taking crypto more seriously as an asset class, as evidenced by the numerous Bitcoin ETF filings, including by some of the world’s largest wealth fund managers.
In a speech on Fox Business on July 5, Larry Fink, the CEO of BlackRock, also said that Bitcoin’s role is largely to “digitize gold,” suggesting that US regulators consider how a spot ETF could democratize finance. Fink suggested that investors could turn to Bitcoin as a hedge against inflation or the devaluation of certain currencies.
So, for those wondering from a bird’s-eye view whether Bitcoin is poised for a correction after an ETF hype-fueled rally, the resilience of traders’ optimistic belief and the lack of over-optimism observed in BTC’s margin show that they are relaxing must.
Bitcoin options and futures markets are suggesting that there are tough times ahead for Bitcoin bears and those expecting a sharp price correction based solely on regulatory and recessionary concerns.
This article is provided for general informational purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risk and readers should do their own research in making their decision.
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