Monday, July 4

CME Bitcoin Derivatives Traders Had ‘Paper Hands’ When BTC Breaks $ 55K: Report


Bitcoin (BTC) derivatives traders on the Chicago Mercantile Exchange (CME) missed incredible gains as the spot price of BTC surpassed $ 55,000 this week.

Retail investors reduced their long exposure to the Bitcoin futures and options markets in late September, according to the data. shared by Ecoinometrics. The number of open short positions also rose, indicating that derivatives traders anticipated that the price of Bitcoin would decline, as shown in the chart below.

CME Bitcoin Derivatives – Retail Traders. Source: CFTC “Trader Commitments” Report, Ecoinometrics

The data was taken on September 28, when the price of BTC had dropped below $ 41,000 on Coinbase, nearly 23% less than its month-to-date high of close to $ 52,950. The drop came in the wake of China’s decision to ban all kinds of crypto transactions.

“This drop is most likely due to a combination of traders not moving their long positions to the October contract and some liquidating completely when it looked like BTC was going to drop below $ 40,000 last week,” Nick said. , an analyst at Ecoinometrics.

“Regardless, the big picture is that futures traders lack conviction.”

“That’s paper hands 101,” said the analyst.

Smart money

Institutional investors in the CME Bitcoin futures market also followed retail sentiment as they reduced their long exposure to the market. But on the other hand, their short positions went up.

Derivatives of CME Bitcoin: smart money. Source: CFTC “Trader Commitments” Report, Ecoinometrics

With CME options traders convinced that the price of Bitcoin would drop, the number of put options, an implicitly bearish bet on the price of Bitcoin, turned out to be almost twice the size of the calls, or the bets on possible profits. of Bitcoin price.

CME Bitcoin Options: Put Options vs. Open Interest Calls. Source: Ecoinometrics

The distribution of the traders position made $ 40,000 the most sought-after strike price target.

On the other hand, some options traders are betting that the spot price of Bitcoin will hit $ 60,000 by the end of October. Additionally, Crypto analyst Hedger highlighted that Bitcoin options expiring on November 26 show that bullish sentiment is skewed towards the $ 80,000 target.

Buy / sell volume in the last 24 hours for the November 26 Bitcoin options contract. Source: Laevitas, Crypto Hedger

“With this current growth rate, Bitcoin has formed very strong support at the $ 50,000 price point, and short-term traders may also need to keep an eye out for the key resistance level around $ 56,000,” said Konstantin Anissimov, CEO of CEX.IO. adding:

“A break below or above these levels can trigger another cataclysmic price reversal or a massive run to $ 60,000 in the fourth quarter.”

Bitcoin offering comes into play

On-chain data shared by Ecoinometrics also showed a higher level of Bitcoin withdrawals from all crypto exchanges.

In detail, the 30-day net exchange flow of Bitcoin has increased since July 2020, as indicated in the color-coded chart below, with blue and red indicating extreme exit and entry, respectively.

Bitcoin rolling net exchange flow. Source: Coinmetrics

Ecoinometrics noted that the amount of Bitcoin currently exiting exchanges is higher than in previous four-year halving cycles.

Bitcoin exchange net inflow (second halving vs third). Source: Coinmetrics

Meanwhile, traders see the reduction in the supply of Bitcoin on exchanges, with increasing “hodling” activity, as additional catalysts for a liquidity crisis and further price hikes.

Related: Bitcoin ‘Big Breakout’ Fractal Suggests BTC Price May Hit $ 250K – $ 350K In 2021

“Back then, there were indeed periods of net exits, but in terms of size, they look much less dramatic than we have now,” Ecoinometrics noted, adding:

“That is another sign that we are on the way to a liquidity crisis that could drive the value of Bitcoin much higher than it is right now.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every trade and investment move involves risk, and you should do your own research when making a decision.