Bitcoin’s (BTC) sudden drop of $ 11,500 resulted in liquidation of BTC futures contracts valued at more than $ 1.64 billion. That massive figure equates to 8.5% of the total of $ 19.5 billion in open positions that happened to just hit its all-time high.
While these are significant numbers, they were proportionally lower than the $ 1 billion liquidation of futures on November 26, 2020. At that point, the 16% correction after the Bitcoin price test reduced the open to a low of $ 16,300 Positions by 17%.
Given today’s big price movement, investors’ positive expectations for Bitcoin remain unfazed, as neither the funding rate for futures contracts nor options with a delta offset of 25% are showing any red flags.
Open interest fell 8%
Bitcoin futures aggregate open positions. Source: Bybt.com
As the graph above shows, negative price fluctuations and reductions in the open positions of BTC futures do not affect the long-term growth of Bitcoin. Between January 19 and January 23, the indicator fell 20%, but it only took two weeks to rebound to the $ 13 billion level.
The open interest will vary more aggressively when traders use excessive leverage. In this case, normal price fluctuations lead to cascading liquidations, reducing the number of open contracts.
Contango remained stable, which indicates a healthy market
By measuring the premium of the futures contracts at the current spot level, one can infer whether professional traders are bullish or bearish. Typically, markets should show a slightly positive annual rate, a situation known as contango.
Bitcoin March 26th Futures Annualized Premium. Source: NY DIG Digital Assets Data
Although the premium was weakened after hitting 5.7% on Feb.17, it has since declined to 3.5%, which is average. Given the 31 days remaining until the contract expires on March 26, this translates to an extremely bullish annual rate of 50%.
As previously reported by Cointelegraph, the funding rate for perpetual contracts has exceeded 2.5% per week. Hence, arbitrage desks on March contracts are likely to pay such a high premium to take advantage of the tariff differential.
The options market’s delta skew of 25% remains optimistic
The 25% delta skew measures how prices for neutral to bullish call options are valued as comparable bearish put options.
Bitcoin 3 month options 25% delta offset. Source: laevitas.ch
The indicator serves as an indicator of fear and greed for options traders and is currently at a negative 6%, which means that protection is more expensive to go up. This further confirms that market makers and top traders are not in despair.
Key indicators continue to favor bulls
Today’s price movement may come as a surprise to new entrants, but those who remember when Bitcoin price crashed around $ 11,200 between January 10th and 11th will know that these sharp movements cannot be considered unusual especially given the 6 of Bitcoin. Daily volatility at 5.1%.
The data suggests that traders who buy today’s dip are likely to be ahead. Bitcoin’s positive news flow and growing institutional investor interest in BTC are unlikely to accelerate until after today’s $ 48,000 retest.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.
