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Bitcoin (BTC) has hovered above $20,000 for the past nine days, but traders are wondering if resistance will hold as traditional market conditions deteriorate.
On November 3rd, the Bank of England raised interest rates by 75 basis points to 3%. This was his biggest raise since 1989. The risk of a prolonged recession also increased as the monetary policy committee struggled to contain inflationary pressures.
Britain’s monetary authority said its latest growth and inflation forecasts indicated a “very challenging” outlook for the economy. The commission’s statement puts negative pressure on the jobs report, adding that “high energy prices and tight fiscal conditions are weighing on spending.”
The US Federal Reserve (Fed) also raised interest rates on November 2nd. This was his fourth consecutive increase, and was the highest since January 2008. It has fallen 4.5% since October 29th.
To get a better idea of how professional traders are positioned in the current market conditions, let’s take a look at derivatives indicators.
A delta skew of 25% indicates that market makers and arbitrage desks are overcharging for upside or downside protection.
In a bear market, the skew indicator exceeds 10% as options investors set higher odds for a price decline. On the other hand, in a bullish market, the skew indicator tends to be less than -10%, meaning bearish put options are discounted.
Delta skew was above the 10% threshold until October 26th. A more balanced situation emerged, but his $21,000 resistance test on Oct. 29 wasn’t enough to instill confidence in his options traders.
Currently, the 60-day delta skew is 6%, so whales and market makers are setting similar odds for upside and downside. However, as BTC approaches the $20,000 support, other data show less confidence.
The long-to-short indicator excludes externalities that may have only impacted the options market. We also collect data from exchange customers’ physical, perpetual and quarterly futures contract positions, giving us better information about how professional traders are positioned.
Readers should monitor changes rather than absolute numbers, as there are occasional methodological discrepancies between different exchanges.
Bitcoin rose 9% from Oct. 22 to October, but professional traders slightly deleveraged their long positions on the 29th, according to the long-to-short indicator.
For example, Binance’s ratio of traders improved somewhat from its opening of 1.25, but then ended the period below its starting level of 1.22. Huobi, on the other hand, saw a slight decrease in his long-to-short ratio as the indicator moved from his 1.03 to 1.00 in his seven days to October 29.
On the OKX exchange, the metric decreased slightly from 1.01 on October 22nd to 0.94 on October 29th.
Related: Robinhood Isn’t Giving Up On Crypto Despite Q3 Crypto Earnings Sliding 12%
These two derivatives indicators options skew and long to short see Bitcoin price corrections of 4.5% since the $21,000 test on Oct. 29 supported by moderate levels of mistrust from leveraged buyers. suggesting that
A more optimistic sentiment could have pushed the 60-day delta skew into the negative range, pushing the long-to-short ratio to higher levels. It’s important to note that even professional traders can misinterpret the market, but current readings from the derivatives market favor weak support at $20,000.
On an optimistic note, there are no signs that professional traders are expecting a negative move. Basically, it’s been 50 days since Bitcoin last traded above $22,000, so nothing has changed if the price returns to the $19,000 range.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading movements involve risk. You should do your own research when making a decision.
