Bitcoin (BTC) price is continuing to trade below its 2023 high, indicating that investors may have underestimated the strength of the $44,000 resistance. Despite trading below $42,000, reaching $50,000 and beyond is still possible. Bitcoin derivatives metrics show that traders remained optimistic despite a 6.9% drop, but the question remains whether this optimism justifies further gains.
The recent $127 million liquidation of leveraged long Bitcoin futures on Dec. 11 may seem significant, but it represents less than 1% of the total open interest. This liquidation triggered a 7% correction in less than 20 minutes, accelerating Bitcoin’s crash in the short-term.
While derivatives markets played a crucial role in the recent negative price movement, the impact of forceful liquidation orders dissipated quickly, disproving the notion of a crash solely driven by futures markets.
To determine the sentiment of Bitcoin whales and market makers, traders should examine the Bitcoin futures premium, also known as the basis rate. The data reveals that the BTC futures premium barely fluctuated despite the 9% intraday price drop on Dec. 11, remaining above the 10% threshold. Additionally, analyzing options markets shows a neutral 25% delta skew since Dec. 5, indicating balanced cost for both call and put options.
Regarding retail traders, the Bitcoin perpetual futures 8-hour funding rate shows a modest increase in leverage demand among long positions between Dec. 8 and Dec. 10, suggesting that excessive retail leverage longs didn’t drive the rally and subsequent liquidations.
Bitcoin’s rally to $44,700 and subsequent correction to the current $41,300 appears to be primarily driven by the spot market, reducing the odds of cascading liquidations due to excessive optimism tied to the expectation of a spot exchange-traded fund (ETF) approval.
In conclusion, derivatives indicate that positive momentum for Bitcoin hasn’t faded despite the price correction.
**Historic Background:**
Bitcoin, the first cryptocurrency, was created in 2009 by an unknown person or group of people using the name Satoshi Nakamoto. Since then, it has experienced significant price fluctuations and has attracted attention from both retail and institutional investors.
As Bitcoin continues to evolve, its price movements are closely scrutinized by the market, and the use of derivatives has become an integral part of understanding its overall sentiment.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
