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Saturday, October 16, 2021

Bitcoin Price Touches $40K

The traders of Bitcoin might be experiencing euphoria after the cryptocurrency experienced a rally of 35%. Interestingly, the reports suggest bears have not been too worried due to a similar breakout that took place in the middle of this month with the price failing to hold the support of $40k.

The price of BTC crashed to a sum of $31k on the 8th of June and then bounced to a sum of $41k just six days later. The rally of 31% did lead to a short contracts liquidation of $1.4 billion BTC that spread over the entire week. As it stands, the market bears were not really expecting this to happen, but BTC did end up trading below a sum of $38,000 which led to a downtrend. 

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This implies that the market bulls do have major reasons to doubt the sustainability of the current rally- as there haven’t really been any major changes to justify Bitcoin’s price tag of $40,000. Also, the price couldn’t definitely be suppressed by the ongoing FUD regarding the exodus of the miners from China, and the movement of Binance to seek some form of regulatory approval. 

The Futures Premium Has Not Shown A Significant Recovery For Bitcoin

One of the best indications of the optimism of professional traders is the premium in the futures market simply because it measures the gap that is present between the current spot market levels and the monthly contracts.

In most healthy markets that deal with Bitcoin, there is an annualized premium of around 5% to 15%. However, there is always a scenario of backward movement that takes place during bearish markets- in which case the indicator goes negative or simply fades. 

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Whenever the makers of the market as well as professional traders move towards a bullish approach, they usually demand a much higher premium on most of their call options. There is no denying that such a trend will inevitably cause a negative 25% delta skew for cryptocurrencies like Bitcoin. 

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