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Key Bitcoin price metric shows pro traders are nervous about $19K BTC

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This week Bitcoin (BTC) price rallied to a new 3 year high at $18,965, leading investors to believe a new all-time high above $20,000 is on the cards. 

While these are exciting times, data does show that some professional investors feel antsy about the price at these levels and the absence of retail FOMO has some calling for a sharp pullback.

Data shows Bitcoin hasn’t seen a drop larger than 5% since Sept. 4 and over the past 77 days the digital asset has gained 84%.The last time similar price action was observed was on Nov. 25, 2019.

Bitcoin price (USD) at Bitstamp. Source: TradingView

Back then, BTC made a 47% move from $6,900 to $10,150 by mid-February 2020, a 86 day sequence. Nevertheless, one should not jump to the conclusion that a substantial correction necessarily follows every movement without a 5% daily drop.

Evidence of such disparate expectations can be extracted from the futures contracts basis. Typically, the indicator should display a 3% to 10% annualized premium.

BTC 3-month futures contract premium, January 2020. Source: Skew

Take notice how traders were willing to pay an additional 20% annualized to carry leveraged positions back in February. This is rather unusual and a signal of extreme optimism.

This time around, the basis indicator has been gravitating near 10%. Therefore, it is safe to infer that the odds of cascading sell order liquidations is much lower this time.

BTC 3-month futures contract premium. Source: Skew

Lack of optimism is a sign of reduced conviction

Traders have been taken aback by this unusual trend, and data confirms that there is a complete lack of conviction. Even though the BTC futures contracts premium currently stands at a bullish zone, that validify buying it indiscriminately.

To effectively gauge whether professionals have been carrying long positions throughout this rally, investors should monitor the top traders long-to-short ratio at leading crypto exchanges.

Huobi BTC top traders long-to-short ratio. Source: Huobi

At Huobi we can see that the top traders entered a net short position as Bitcoin surpassed $16,000 on Nov.16. On Nov.19, a few bearish bets appeared as BTC failed to break the $18,000 resistance. Once again, they were quick to close their losses and are currently flat. Therefore, one can assume that professional traders have been trying to guess a local top without much conviction.

Interestingly, data from Binance shows top traders applying a different strategy. Despite this, it still reflects a lack of conviction, as one can infer below.

Binance BTC top traders long-to-short ratio. Source: Binance

Binance top traders held a 10% net long while Bitcoin rallied above $16,000 but they then scrambled to buy after it shot above $17,500.

While still maintaining a bullish position, they significantly reduced it as BTC struggled to break $18,000 on Nov.18.

It is worth noting that exchanges gather top traders’ data differently, as there are multiple ways to measure clients net exposure. Therefore, any comparison between different providers should be made on percentual changes instead of absolute numbers.

Ultimately, the data signal that there is some indecision or at least a lack of strong conviction among top traders.

When the market is sending mixed signals there’s nothing wrong with sitting tight and not being in a position. At least, this is what savvy traders seem to be doing.

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.

Source: https://cointelegraph.com/news/key-bitcoin-price-metric-shows-pro-traders-are-nervous-about-19k-btc

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Breaking Down the Effect of Bitcoin’s $3,000 Drop on the Futures Market

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  • Bitcoin has undergone a strong drop since peaking at $19,500 just days ago
  • The coin currently trades at $17,000 as of this article’s writing
  • Analysis compiled by Coinalyze found that over the course of the past few days, $1 billion worth of open interest has been wiped from leading Bitcoin futures exchanges
  • This was accompanied

How the Strong Bitcoin Drop Affected the Futures Market For BTC

Bitcoin has undergone a strong drop since peaking at $19,500 just days ago. The leading cryptocurrency currently trades for $17,000, far below the highs.

The drop came in a short period of time, with liquidations pushing Bitcoin dramatically lower in a wave. The issue was that many market participants were overleveraged, meaning that a small correction triggered liquidations and stop losses, resulting in a rapid cascade lower.

Analysis compiled by Coinalyze found that over the course of the past few days, $1 billion worth of open interest has been wiped from leading Bitcoin futures exchanges.

This was also marked by a spike in trading volume, of $66 billion on futures exchanges and $7 billion on spot exchanges.

These two data points in tandem suggest that the recent correction marked a needed correction in the Bitcoin market to ensure that derivatives players were not getting too far overleveraged.

After the strong correction, the funding rates of top Bitcoin futures markets have reset. The funding rate is the rate that long positions pay short positions on a recurring basis to make sure the price of the future stays in line with the spot market.

According to ByBt, a crypto derivatives tracker, the funding rates of most leading exchanges have reset to the baseline of 0.01% per eight hours. Further, on OKEx in particular, the funding rates of many pairs have actually trended into a negative region, suggesting an increasing number of short takers.

Bitcoin may revert higher if there continues to be low and even negative interest rates and if consolidation takes place.

Par for the Course

Many say that this correction is par for the course in that it should be expected.

Bob Loukas, a long-time Bitcoin investor and macro analyst, recently pointed out that the previous bull run was punctuated with drawdowns similar to the one taking place now:

“Most have a short memory. Remember in Jan 2017 just shy of #Bitcoin ATH’s, boom 34% decline. The 2 months later a sharp rally, new ATH’s, and double boom 34% decline. Never a one way street.”

Countless others in the space have corroborated this, arguing that it is actually healthy for bullish markets to pull back.

Featured Image from Shutterstock
Price tags: xbtusd, btcusd, btcusdt
Charts from TradingView.com
Macro Analysis Predicts Bitcoin Has Begun Rally Toward $100k

Source: https://bitcoinist.com/breaking-down-the-effect-of-bitcoins-3000-drop-on-the-futures-market/?utm_source=rss&utm_medium=rss&utm_campaign=breaking-down-the-effect-of-bitcoins-3000-drop-on-the-futures-market

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Facebook’s Libra Could Reportedly Arrive in January 2021 in a Scaled-Down Version

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  • Although Facebook failed to launch Libra in mid-2020 as initially planned, the social media giant could do so in early 2021.
  • Finance Times cited three people working on the project claiming that Libra’s long-awaited launch could come in January 2021 but in a scaled-down version.
  • CryptoPotato reported before that Libra already changed its original idea from being a “single global digital currency” to creating a series of various digital coins. 
  • The FT coverage asserted that Libra could see the light of day after receiving approval to operate as a payments service from the Swiss Financial Market Supervisory Authority (FINMA). However, the Libra Association would initially release just a single coin backed one-for-one by the dollar. The other set of currencies would be rolled out later, should the FINMA application is successful.
  • Facebook rattled the financial world last year after announcing plans to launch its own cryptocurrency called Libra. After receiving scrutiny from world watchdogs, the Libra project underwent numerous changes, including executive replacements.
  • Libra suffered more blows when several notable partners left. Those included PayPal, Mastercard, eBay, Vodafone, and more.
  • In an attempt to salvage the project, the Association decided to make further changes by renaming Libra’s wallet provider from Calibra to Novi.

Featured Image Courtesy of AlJazeera

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Source: https://cryptopotato.com/facebooks-libra-could-reportedly-arrive-in-january-2021-in-a-scaled-down-version/

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Bitcoin Worth $500 Million Withdrawn From OKEx as Users Look for Other Alternatives

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Users withdrew a record 29,300 BTC from OKEx after the Malta-based cryptocurrency exchange resumed withdrawals yesterday. This comes after bitcoin (BTC) price kickstarted its epic freefall dropping to levels near $16,500 before bouncing back up again. But what is the reason behind the massive bitcoin exodus out of OKEx?

OKEx Sees Significant BTC Withdrawals And Deposits

As per the latest update from on-chain and market analysis firm Glassnode, OKEx users have withdrawn a record 29,300 bitcoins after the exchange gave the green signal for resuming withdrawals yesterday. These BTC transactions amount to roughly $5 billion (considering the current spot rates).

Glassnode also observed a deposit of 21,600 BTC on OKEx. Withdrawals and deposits together had a depreciating effect on the exchange’s overall bitcoin balance which reduced to around 212,000 BTC.

The potential cause behind the massive exodus of bitcoin holdings could be a result of users leaving OKEx in search of other alternatives. Binance, Huobi, and some third party wallets were at the receiving end of the initial bitcoin transfers from the exchange.

Users Dissatisfied With OKex; Seek Other Alternatives

OKex announced the resumption of withdrawals on November 19. Few folks welcomed the developments, but most of them seemed miffed with the exchange’s recent bitcoin and crypto withdrawal suspension, with a lot of users demanding compensation else they make their move to other platforms.

Large BTC Deposits Point To ‘Centralized Failure’ Risks

As reported by CryptoPotato, OKEx had more than 200,000 BTC stored in their wallets during the ‘withdrawal lockdown.’

Although OKEx CEO Jay Hao assured users that their funds are safe and that there’s no “cause for alarm,” the vastness of the above bitcoin stash is pretty alarming. Especially because it is controlled by one single organization.

What’s more disappointing is that the official who had access to the private keys was ‘out of touch’ with the management. The OKEx personnel wasn’t able to reach out to him. This is not desirable since it poses huge risks to these BTC stashes falling prey to coordinated attacks that target centralized points of failure.

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Source: https://cryptopotato.com/bitcoin-worth-5-billion-withdrawn-from-okex-as-users-look-for-other-alternatives/

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