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Wednesday, August 10, 2022

Bitcoin Price Has Closed In At $40K

The daily price chart of Bitcoin seems to be moving towards a pattern of steady recovery, but there have been some concerning indicators from the market of derivatives. At this current moment, the options and the futures markets have been showing quite a lack of confidence from the pro traders of the cryptocurrency, but there is definitely a positive spin to the entire data.

As it stands, the road to a price of $40,000 does seem quite uncomfortably predictable, and most cryptocurrency traders usually call it manipulation when such haphazard movements in price take place. 

Bitcoin Future Has Traders Up In Arms

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Irrespective of the reason behind the price recovery of Bitcoin, most of the investors should have readily analyzed the markets of derivatives to understand how market makers, whales, and arbitrage desks have been positioned. While the favorite instrument for retail traders continues to be the perpetual contract, most of the pro traders have often fixated on fixed-calendar futures and options. Although, as of now, they are more complicated to trade, with the derivatives offering much more complex strategies. 

There have been data that proves that there hasn’t been any relevant futures contract liquidation since the 23rd of January. When leverage long buyers have their positions seemingly terminated, it does accelerate the price correction, because most of the derivatives exchanges do need to sell those futures at a solid market price.

If one were to look at the data readily provided, they would notice how the last big forced position termination on longs was $290 million on the 23rd of January. This does explain why the recovery of Bitcoin was quite serene over the last week. 

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The Bitcoin futures annualized premium should run somewhere between 5% to 12% to compensate all the traders for locking in the money for two to three different months until the contract expires.

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