Bitcoin at a Crossroads: Price Metrics vs. Derivatives Insights
Navigating the Market Sentiment: A Deep Dive into Bitcoin's Current Price Levels, Derivative Signals, and Potential Bullish Rebound amidst Growing Recession Concerns
This morning, I found myself grappling with a flash of doubt in my personal Bitcoin market sentiment. While yesterday's post dispelled fears of massive selling by governments and Mt. Gox creditors, while updating today’s By the Numbers spreadsheet, a different story crept into my head. Let’s dive into the price metrics first and then look at some other charts to put this period into better context.
Check out BitcoinandMarkets.com for more from Ansel Lindner!
Price Levels and Derivatives
I had to catch myself this morning getting overly bearish. In yesterday’s post, I examined the recent reports of massive selling by governments and Mt. Gox creditors concluding they were overblown, but something about the chart this morning tickled the smallest doubt. Today, let’s switch around our usual order and take a look at price metrics first.
By looking at the price metrics alone you might see why a flash of doubt crept into my personal market sentiment. The current spot price, at time of writing, is $60,755. As you can see above, and using the right-most column, that price is below much of the support levels we’ve talked about on recent posts. It is below the 50 DMA, which is seen as the 50 yard line, meaning we are deep in the wrong territory. It is below the 100 DMA, the weekly Bbands mid-line, and the ATH Realized Price–the price we’ve been using as our demarcation line of where weak-hands will become the marginal sellers. Hash Ribbons also flipped back into the negative. Finally, volatility finally has started to tick upward. All of these things are hallmarks of a bear market reversal.
Hang On, Derivatives Tell a Different Story
Derivatives markets on the other hand are surprisingly calm. The Perps Funding Rate has come down and stuck at 5% for the last week. In fact, when we look more closely at the Funding Rate YTD, the recent low saw significant negative funding rates across the industry. While not sufficient by itself to signal a bottom, it is a necessary check box.
Source: Coinglass
The Futures Annualized Rolling Basis or cash and carry level is moderately cooler down to 10% but still showing overall market bullishness. We have to wait for today’s quarterly expiration to see how this number will be affected. Quarterly closes are always meaningful events in Bitcoin. Options 25-Delta Skew is also neutral, not showing any out of balance hedging either way.
Overall, even with the price metrics looking so bad, the derivatives market tempers this bearishness and provides some evidence of a bottom forming, allowing price to head back higher.
Bullish Scenario in Heat Map
Keeping on the subject of derivatives, let’s look at some different heat map time frames. These are charts showing trades placed in each respective window and where they will liquidate, providing liquidity to the market.
Source: Coinglass
The 1-week heatmap above shows the major sell-off this week on Monday. There are some long liquidations to be had below the price which might lead to price dipping down to $60,000, but more dense short liquidations above the price all the way back to roughly $65,000.
The 1-month chart below is where it starts to get exciting. We have cleared out most of the liquidations to be had by continuing downward, which means the price will not be helped going lower by liquidations as it has been for the last couple of weeks. Now, several levels of major liquidations are appearing above the price all the way to $72,000 again.
Source: Coinglass
The 3-month chart shows the gravitational strength of this $72,000 level in context. On Binance USDT perp contract alone, there is $12.9 billion of liquidations between $72-73,000. Other exchanges have less volume but all have the $72k level as the massive bright spot on their heat maps. When shorts are liquidated, they are forced to buy bitcoin to close the position. IOW this is rocket fuel once we get back to ATHs.
Source: Coinglass
Summing Up
Despite the bearish signals in the price metrics, including being below key moving averages and increased volatility, the derivatives market provides a contrasting perspective. The Perps Funding Rate and Futures Annualized Rolling Basis suggest underlying bullishness, while the heatmaps reveal significant liquidation levels above the current price, which could act as a catalyst for a price rebound. This period of the Bitcoin cycle requires courage to hold. Bitcoin’s euphoric gains are not easy and the best way to not get shaken out of your position is to look at several sources of metrics and indicators, like we try to do on this newsletter. While the downward momentum in price seems at its height, there are strong signs that a bottom might be forming, and a recovery about to start.
Bitcoin Magazine Pro Market Dashboard
The following is a screenshot of the Bitcoin Magazine Pro™ Market Dashboard. Click the image below ⤵️ to zoom in. 🔍
🔗 Download this week's Bitcoin Magazine Pro Market Dashboard in PDF format. ⤵️
If you liked this content please give a like and share! Comment below with your reactions to this post and any recommendations for future topics.
Thank you for reading Bitcoin Magazine Pro, we sincerely appreciate your support!
Not Financial Advice.
 | A guest post by
|