Analysts Think Bitcoin Prices Won’t Stay Below $33,000 for Long
Over the past 48 hours, the Bitcoin price surged from $31,000 to $34,800 before reversing course and losing most of these gains.
On January 25, President Joe Biden expressed his willingness to reduce the $1.9 trillion stimulus package. This could have reduced the incentives for those who buy BTC as a hedge against inflation or hedge against the US dollar’s devaluation against major world currencies.
Short-term charts may not reflect Bitcoin’s optimism. But various derivatives indicators and the flow of major traders leave no room to expect prices below $30,000.
Major traders bought the fall
Bitcoin has been testing the support at $30,800, but the bulls have shown aggressive buying activity below that level. Not surprisingly, both MicroStrategy (USD MSTR) and Marathon Patent Group (USD MARA) recently announced major purchases.
The data shows that major OKEx traders have been buying heavily on the decline and the premium on futures contracts does not reflect excessive leverage from buyers.
The expiration on January 29 will extinguish $4.9 billion in futures contracts or 47% of the total open interest of $10.5 billion.
Although initially worrisome, a large portion of those contracts is usually renewed. These include $1.53 billion in OKEx, $875 million in CME, and $840 billion in Binance.
Traders who are currently long can buy a longer-term contract while simultaneously closing the January futures position. Therefore, regardless of being underwater or not, both parties can keep their bets open as long as there is enough margin deposited.
While recent sell-off may have been significant, professional traders are not easily affected by a 12% price swing. This hypothesis is especially true considering Bitcoin’s 120% annualized volatility.
Since January 22, the top traders on Binance held a stable and balanced position. But they started adding longs in the early hours of January 25. This trend continued on January 26, and the indicator currently favours longs (buyers) by 13%. The ratio of long to short positions of the top traders on Binance remains below their monthly average of 1.20.
The futures premium held for the last three falls
When it comes to the futures premium, traders should expect an annualized premium of 10% to 20% compared to regular spot exchanges in healthy markets. This indicator should be comparable to the returns on stablecoin deposits.
As long as this indicator maintains levels below that range, it should be considered an alarming sign. Besides, a sustainable base above 20% indicates excessive buyer leverage, creating the potential for cascading liquidations and eventual market crashes.
- Trading Instrument
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