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Bitcoin is shaky but medium-term bull case intact: on-chain analyst

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The price of Bitcoin (BTC) declined below $10,000 for three consecutive days. Despite the weakness in BTC’s short-term trend, an on-chain analyst says mid-term bullishness is intact.

The weekly chart of Bitcoin. Source: TradingView.com

Within five days, the price of Bitcoin slipped from $11,462 to $10,000, recording a 12.6% drop. Gold has also struggled to rebound from fading momentum, which coincides with the recovering U.S. dollar.

How is a bullish Bitcoin outlook still intact?

According to Willy Woo, an on-chain market analyst, local on-chain indicators are turning bullish.

On-chain indicators include the likes of “HODLing” activity, active addresses, network activity, and NVT ratio. The Bitcoin NVT signal, for instance, attempts to spot market peaks by evaluating the price against daily transaction value. 

On-chain data points likely hint at a bullish mid-term trend because of Bitcoin’s steep drop since $12,000. While the price of BTC plummeted by nearly 20% since its yearly high, network activity remains relatively stable. Woo said on Sep. 6:

“Local on-chain switching bullish (looking at the next few weeks out), not calling this has bottomed, even though it may have. Playing the big swings it’s not a bad time to buy back in.”

Bitcoin network activity is relatively stable

Bitcoin network activity is relatively stable. Source: Blockchain.com

The level many traders are observing is the $9,650 CME gap. A gap between the CME Bitcoin futures market and other exchanges form when CME closes during the weekend. The $9,650 gap has been present since July.

Regarding questions on the gap and the likelihood of BTC dropping to it, Woo said it might get front ran. He noted:

“I also wonder about the gap being front run, to fill longs with solid liquidity. Whales on derivative exchanges have enough dominance to make that so.”

One concern in the near term is that the NVT ratio is still hovering at 81.5. When the NVT ratio stayed above 70, in previous market cycles, it marked a local top. 

The Bitcoin NVT Ratio

The Bitcoin NVT Ratio. Source: Woobull.com

Many on-chain indicators show an optimistic mid-term trend, but some suggest shaky short-term momentum.

$8,800 is major support, big correction unlikely

As Cointelegraph previously reported, traders do not expect a March-like 50% drop in the price of Bitcoin.

Su Zhu, the CEO of Three Arrows Capital, emphasized that the probability of Bitcoin declining to $5,000 is now less likely than BTC surging to $100,00. He wrote:

“I am actually flabbergasted by the strength shown at 10k and prob means 100k is more likely than 5k at this stage.”

There is an abundance of whale buy-orders at $8,800 on Bitfinex. Since whales tend to bid the lowest support levels to ensure liquidity, a drop to the high-$8,000 levels is a possibility. But a black swan market plunge at this period, where BTC was able to defend $10,000 for a long time, is unlikely.





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Bitcoin

Bulls aim to reclaim $40K ahead of Friday’s $520M BTC options expiry

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Bitcoin (BTC) bulls have little reason to celebrate the 25% rally over the past nine days. After testing the $31,000 support on June 8, top traders’ optimism faded, and even the recent $41,000 high was unable to boost their expectations.

Contrary to market sentiment, the United Kingdom’s Financial Conduct Authority has indicated a significant increase in cryptocurrency ownership in the country. A consumer survey found that 2.3 million adults in the U.K. now hold crypto assets, which is up from 1.9 million last year.

Another theory that has been proven wrong is the supposition that whales have been selling, causing the Bitcoin price to remain below $47,000 for 31 days. Counter to this narrative, data from Santiment shows that addresses holding between 100 and 10,000 BTC increased their positions by $367 billion during that period.

Regardless of investors’ long-term bullishness, there is $520 million worth of BTC options set to expire at 8:00 am UTC on June 18. While the initial screening shows the neutral-to-bullish call options with a 20% lead, a more granular view provides a different picture.

Bitcoin June 18 aggregate options expiry by strike. Source: Bybt

The neutral-to-bullish call (buy) option provides upside price protection to buyers, while the opposite occurs when holding the protective put (sell) options. By measuring each price level’s risk exposure, traders can gain insight into how bullish or bearish traders are positioned.

The total number of contracts set to expire on June 18 is 13,400, or $520 million at Bitcoin’s current $39,000 price. Bulls lead with 1,240 contracts, equivalent to $48 million, but it depends on what price Bitcoin will stand on Friday morning.

Bulls have a $60 million lead above $38,000

While the initial picture seems bullish, one must consider that the $44,000 call (buy) options are almost worthless, with less than sixteen hours left before expiry. A more balanced situation emerges when those bullish contracts are disregarded.

Less than 2,200 call options have been placed at $38,000 or below, an $84 million open interest. At $40,000, another 1,000 neutral-to-bullish options become active, raising the open interest to $128 million.

On the other hand, the protective put options at $38,000 and higher amount to 750 contracts are worth $28 million. This gives bulls a comfortable $60 million lead and an incentive to move the price above $40,000, increasing the difference to $120 million. In this case, 99% of the protective put options will become worthless.

Related: Traders look for Bitcoin price daily close at $41K to confirm bullish reversal

Bears need to wait for until last minute to salvage their position

Options contracts at Deribit, OKEx, and Bit.com happen exactly at 8:00 am, so there is no benefit in trying to manipulate the price ahead of that event. However, bears may have thrown the towel, concentrating efforts on the monthly expiry on June 25. Bulls, on the other hand, have strong incentives to boost their profits on June 17.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.