Period of Consolidation
After a significant rally in recent months, Bitcoin (BTC) has been trading within a narrow 7% range since November 12th, signaling a period of consolidation around the $91,000 mark. Despite this consolidation, derivatives indicate that professional traders remain confident in the bull market.
Derivatives Indicate Bullish Sentiment
The BTC options delta skew at Deribit has dropped to its lowest level in four months, indicating that the market is pricing a discount for put (sell) options. Levels below -6% suggest bullish sentiment and reflect confidence in the $87,000 support level, particularly from whales and arbitrage desks.
MicroStrategy: Catalyst or Sole Driver?
The speculation that a few entities are responsible for the buying activity above $87,000 gained traction after MicroStrategy revealed an additional purchase of 51,780 BTC on November 18th. According to an SEC filing, the company now holds over $29 billion in Bitcoin and is actively pursuing a plan to raise $21 billion through the issuance and sale of company shares.
However, investors believe that Bitcoin has a greater chance of continued price appreciation if spot BTC exchange-traded fund (ETF) net inflows show signs of early adoption, including increased exposure from pension funds and large hedge fund managers. However, the latest data from November 14th and 15th revealed $771 million in net ETF outflows as investors decided to take profits following the recent rally.
Analyzing Professional Traders’ Sentiment
To understand how professional traders are positioned, it’s essential to analyze Bitcoin futures and margin markets. For example, sustained demand for leveraged BTC futures indicates bullish sentiment, while increased use of price hedging suggests whales and arbitrage desks lack confidence in the current price momentum.
Bitcoin Futures Premium
The Bitcoin two-month futures premium (basis rate) surged to 17% on November 18th, far exceeding the 5%–10% neutral threshold. This level of optimism was last observed almost eight months ago, in late March, when Bitcoin successfully defended the $64,000 level after two weeks of downward pressure.
BTC Margin Markets
Unlike derivatives contracts, which always require a buyer and a seller, margin markets allow traders to borrow stablecoins to buy spot Bitcoin. Similarly, bearish traders can borrow BTC to create short positions, betting on a price decline.
Long-to-Short Ratio at OKX
Currently, the Bitcoin long-to-short margin ratio at OKX is 14 times in favor of longs (buyers). Historically, periods of excessive confidence have driven the indicator above 40 times, while levels below 5 times favoring longs are generally considered bearish.
Conclusion
Ultimately, Bitcoin derivatives and margin markets signal strong bullish momentum, regardless of the concentration of buy-side activity driven by MicroStrategy. The lack of a significant impact from the retest of the $88,700 level on November 17th further suggests that investors are not ready to exit at the first negative price swing.
Implications
This analysis has several implications for traders and investors:
- Professional traders remain confident in the bull market, despite the consolidation around $91,000.
- MicroStrategy’s additional purchase of 51,780 BTC on November 18th may not be the sole driver behind Bitcoin’s surge to a new all-time high.
- The lack of a significant impact from the retest of the $88,700 level on November 17th suggests that investors are not ready to exit at the first negative price swing.
Additional Resources
For those interested in learning more about Bitcoin and its derivatives markets, the following resources may be useful:
- Cointelegraph’s Markets Outlook provides critical insights to spot investment opportunities, mitigate risks, and refine trading strategies.
- Laevitas offers real-time data on Bitcoin options markets and provides in-depth analysis of market trends.
By subscribing to the Markets Outlook newsletter, readers can stay up-to-date with the latest developments in the cryptocurrency markets and gain a deeper understanding of the factors driving price movements.