As a seasoned analyst with over two decades of experience in financial markets, I have witnessed numerous market cycles and trends. The recent Bitcoin rally following Donald Trump’s election victory is reminiscent of the infamous “Trump trade” in traditional equities during his presidency.
The strong upward trend in Bitcoin (BTC) prices after Donald Trump’s victory in the U.S. presidential election is starting to decelerate, noticeably in the derivatives market. This can be seen as Bitcoin fell below the $90,000 level on Thursday.
Bitcoin Experiences Significant Liquidation Activity
Based on Bloomberg’s data, the cost difference for Bitcoin futures contracts traded on the Chicago Mercantile Exchange (often utilized by institutional investors to predict price fluctuations) has lessened, suggesting a possible change in investor sentiment towards the market.
According to K33 Research, the gap, which is the variation between the future price and current price, has decreased to roughly 10%, having been consistently around 13%-16% since the election.
Vetle Lunde, who leads research at K33, noted, “The markets appear to be showing signs of cooling… this could possibly indicate a move towards more cautious investment approaches due to the current market fluctuations.” This change suggests that investors might be reconsidering their tactics in response to the recent price instability.
Presently, Bitcoin is valued at approximately $87,970, marking a drop compared to its previous record high of $93,462 set the day before. In the timeframe since Donald Trump’s election win, this digital currency has experienced a surge in value exceeding 30%.
Concurrently with this rally, there’s been a substantial reduction in long, or bullish, leveraged positions. In the last 24 hours alone, liquidations of these long positions amounting to $447 million took place, which is more than double the $207 million worth of bearish bets that were liquidated.
Renewed Trader Interest
The act of cashing out on profits is also playing a role in the current market drop, especially since Bitcoin neared the $90,000 price point. This level has often seen increased activity in buy orders for call options in the past.
James Davies, head of Crypto Valley Exchange, remarked, ‘Recent market days have been extremely volatile with significant selling off towards the end… The $90k mark stands out as a significant level in the call options activity.’
The main driving force behind this gathering is a surge of immediate interest in the market, as shown by significant investments into Bitcoin-backed Exchange Traded Funds (ETFs) and a generally modest use of borrowing among investors.
As a crypto investor, I’ve noticed an intriguing trend: The funding rate for Bitcoin perpetual futures on overseas exchanges has climbed back up following a dip earlier this week. This rise suggests that traders are rekindling their interest in Bitcoin, possibly due to the “Trump trade” catalyst regaining traction.
Options traders are showing more optimism as there’s a rising trend in calls for prices at $110,000 and $120,000, based on Deribit’s data. As Davies put it, “At the moment, this is purely speculative trading. Prepare for significant market fluctuations and unclear signs until we receive policy updates from the U.S.
With November option expiration around the corner, everyone is curious if the $90,000 mark will act as a barrier for Bitcoin prices or if it will break this level yet another time.
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2024-11-15 08:46