Bitcoin was at its lowest point since May. The high today is $53.8K. While the low is below $42K. Bitcoin is currently at 30% below its November 10 ATH. The following overview and analysis will attempt to determine if the bull market has ended and the next significant support in the event that $42K is broken.
Futures Market Sentiment
Three days ago, we explained that the futures market had been overheated. We can now see that the major driver of today’s sharp fall was the massive flushing in the crypto futures markets. In the last eight hours, Open Interest (OI), plunged by $3.7B.
Technical Analysis for the Mid-Term
Let’s take a look at Heikin Ashi’s candlestick for Bitcoin’s weekly timeframe using Bollinger bands. After touching the $69K upper band (the current ATH since November 10), BTC signaled a correction.
Bitcoin has been supported by the middle band and the 20-week simplemoving average (SMP) for the moment. Bitcoin could touch the lower Bollinger band if it loses support from the middle band.
Onchain Analysis – The Buy/Sell Price Range
The majority (77%) of Bitcoins sold in the last seven days were those who were most likely bought at a price above $60K. The primary sellers were therefore the youngest buyers, who sold at a loss.
Let’s consider the above and then let’s look at the UTXO Histogram. This shows the supply distribution based upon the buy price (last movement).
The following chart shows possible support levels in case the current price drops further. Based on the UTXO Histogram chart, $46.2K ($47K is the 200-day MA) and $40K represent the most important support levels.
Options Market – OI Put/Call Ratio & Implied Volatility
These are the two types options contracts. A Call option gives you the right to purchase at a future price and a Put option allows you to sell.
If traders buy more Calls than Puts, it will lead to a rise of bearish sentiment. The Put Call Ratio, which measures the ratio between Puts and Calls in an options market, can be used as a derivative indicator to help understand the market’s underlying sentiment.
This chart is based on Open Interest (OI). To get a better result, we can combine this ratio and Implied Volatility.
IV is the forward-looking indicator. It is a measure of market risk perception. Data shows that PCR rose from 0.43 to 0.53 over the last month. This means there were more Calls than Puts. The IV also increased as PCR. This indicates that Put activity rises when PCR and IV increase. This bearish signal caused the price drop from $69k down to $53.4K.
Options traders were looking to protect their portfolios from bitcoin price drops caused by news such as the rejection of VanEck’s spot Bitcoin ETF and the new Omicron version. The WHO warning about a new covid-19 variant caused bitcoin prices to drop by around 8%.
It begs the question: Did options traders decide this was the top market? For a better understanding:
First, let’s compare the PCR at Deribit at the $69k ATH, which was 0.46, with the PCR at the previous $64k ATH (0.98). The chart shows that we are still at low levels for this indicator in the long-term.
The OI also notes that more calls (green) than puts (red) were traded following the May 2021 crash. This is in preparation for the expiries. The bull run does not seem to be over, as the above shows.
Top Instrument Open interest (OI)
According to Deribit Exchange data, Top Instrument Open Interest for the past two weeks has shown that options traders remain bullish in the medium-term despite increased demand for Puts. They are open to trading Call options with strike prices greater than $70K in future months.
@N__E__D__A compiled the above analysis. CryptoPotato data provided exclusively by @tsypruyan
Marla Brooks – Financial Analysis
My name is Marla Brooks, and I am the mainstream behind the”observednews.com” for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.