Bitcoin faces its mid-term most critical support area amid another red weekend. Despite 2022’s debut day, Bitcoin has now posted seven consecutive daily red candles, even though there are still a few hours before today’s candle closes.
Option Market Analysis
The recent selling pressure in crypto markets is likely due to the sharp rise in omicron cases and the announcement by the US Federal Reserve about raising interest rates in response to an increase in inflation.
The options market is fraught with fear. Options traders have been selling Calls and buying Puts to hedge their portfolios over the past few days. The Top Instruments open interest rate change for the last 48 hours reveals hedging strategies to short-dated expiries.
The US10Y index is at its highest point in the past year, according to the macro indices. Bitcoin prices have experienced a significant correction when this index reached high levels (marked with a red horizontal line at the bottom of the chart).
The DXY index has shown no bearish signs thus far, which historically correlates with Bitcoin.
BTC is currently in the $40-42K price range on the daily chart. This area has been a support and resistance role over the past year.
This level can be broken down to allow for the intersection of dynamic and static support at $37K. Many analysts believe that bitcoin will retest lower levels due to the Head & Shoulders pattern. This is a bearish pattern in an uptrend.
Futures & Spot Marker Analysis
The Spot Exchanges 7-day moving average Inflow Mean Value (inflows transactions’ mean size) showed selling pressure, while price action tried to break through the $53K resistance.
In the days that followed, the market plummeted to $41K. The spot market inflows are now lower.
This could indicate a worrying trend, as the Futures Market’s open-interest is high due to Binance. Despite significant volatility in the market over the past few weeks, Binance’s open interest has not fallen significantly.
Many analysts fear that the short positions will be wiped out by lower-ranking staff. It is difficult to tell if the long positions make up the majority based on other metrics and the funding rate.
One possible explanation could be that large players short the market to protect against a bearish market. A rational strategy for traders is to avoid high-leveraged positions, until the futures market experiences a growth of open interest. This was what we saw between May 2021 and July 2021.
Marla Brooks – Financial Analysis
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