It is difficult to choose a time frame for technical analysis. However, it is more likely that the trend will prevail if it continues longer. If you look at the 3-day Bitcoin (BTC), chart, you will see an ascending channel pattern that began in June.
Bitcoin price in USD at FTX Source: Tradingview
Even though Bitcoin’s 6.2% surge in consumer prices has led to the largest inflation increase in 30 years, bears will continue to find reasons to support their positions.
Glassnode data shows that long-term investors are diversifying into altcoins and have stopped net-accumulating, according to on-chain analytics firm Glassnode. Analyst Willian Clemente said that the net selling of this class of investors in the last 6 months was the first such sale, which signals a “sell into power” move.
It is important to note that the Bitcoin network was upgraded Nov. 14 in order to improve scripting and privacy. This is a potential “sell-the-news” event for traders, as the community was expecting the improvements.
Data shows that pro traders are neutral to bullish
The futures basis rate is a measure of how bullish and bearish professional traders are leaning. This indicator, also known as the futures premium, measures the difference between current spot market levels and longer-term futures contracts.
In healthy markets, a 5% to 15% annualized increase in premium is to be expected. This is known as contango. Sellers are able to demand more money in order to delay settlement.
Basis rate for 3-month Bitcoin futures. Source: Laevitas.ch
The spike to 20% on Nov. 9 was due to Bitcoin’s 14% gain in three days. After the Nov. 10 all-time high of $69,100, Bitcoin corrected 9%.
The basis indicator currently stands at a healthy 12.2%, which indicates traders’ confidence.
Options traders aren’t as bullish as they used to be
Option markets can be used to exclude externalities that are not specific to futures instruments.
The 25% delta skew is a comparison of similar call (buy) or put (sell). This metric will be positive if fear is present, as the protective put options premium for similar risk options is higher than other options.
When greed prevails, the 25% delta skew indicator shifts to the negative zone.
Deribit BTC options 25% delta skew. Source: Laevitas.ch
Neutral is an indicator that has a skew between -8% and +10% (greed) September 29th was the last day that this indicator moved beyond its range to +10%. Curiously, the same day marked a end to a 23-day bear market that saw Bitcoin go from $52,700 (Sept. 6) to $41,000 (Sept. 29).
The current neutral 25% delta swing might be seen as a “glass half-full” since pro traders seem unaffected by the 95% year-to-date gains.
Data suggests that there is potential for more leverage from Bitcoin buyers. This would ideally see the price trade in the ascending channel that was established in June.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.