The Chicago Mercantile Exchange’s (CME), Bitcoin (BTC), derivatives traders missed incredible profits, as BTC spot price soared past $55,000 this week.
Ecoinometrics data shows that retail investors cut their long-term exposure to the Bitcoin options and futures markets in September. As shown in the chart below, derivative traders also increased the number of short positions, which indicates that they anticipated Bitcoin’s decline.
CME Bitcoin derivatives — retail traders. Source: CFTC, Ecoinometrics “Commitments of Traders”, report
This data was collected on Sept. 28th, when the BTC price fell below $41,000 on Coinbase — almost 23% lower than its monthly high of $52,950. This drop was caused by China’s ban on all types of crypto transactions.
“Most likely, this dip was due to a mixture of traders not rolling long positions to October contract and some outright liquidity when BTC looked like dropping below $40k last Week,” Nick, an analyst at Ecoinometrics, said.
“Regardless, the overall picture shows that futures traders lack conviction.”
The analyst stated, “That’s paper hands 101.”
CME Bitcoin futures traders also followed retail sentiment and reduced their long-term exposure to the market. However, short positions rose.
CME Bitcoin derivatives — smart money. Source: CFTC, Ecoinometrics “Commitments of Traders”, report
CME options traders were convinced that Bitcoin would fall and the number of put — an implicitly bearish wager on Bitcoin’s future price — was almost twice as large than the calls. These bets on possible Bitcoin price gains, however, are not always successful.
CME Bitcoin options — puts and open interest Source: Ecoinometrics
The most desired strike price target was $40,000 according to traders’ position distribution.
Some options traders also predicted that the spot Bitcoin price will reach $60,000 by October’s end. Crypto Hedger, an analyst, pointed out that Bitcoin options expiring Nov. 26 showed bulls’ sentiment tilted toward the $80,000 strike target.
Volume of buy/sell transactions in the last 24 hours regarding Nov. 26 Bitcoin Options contract. Source: Laevitas and Crypto Hedger
“At this rate of growth, Bitcoin has formed strong support at the $50,000 point. Short-term traders may also have to pay attention for the key resistance level around $56,000,” Konstantin Anissimov (executive director of CEX.IO) said.
“A break below these levels or above them can trigger another price reversal or massive run towards $60,000 in Q4.
Play: Bitcoin supply is squeezed
Ecoinometrics shared on-chain data that showed a higher rate of Bitcoin withdrawals from all crypto exchanges.
The color-coded chart below shows that Bitcoin’s 30-day net currency flow has been increasing since July 2020. Red and blue indicate extreme outflow and inflow respectively.
Bitcoin rolling net exchange flow. Source: Coinmetrics
Ecoinometrics reported that Bitcoin is leaving exchanges at a higher rate than in the four-year halving cycles.
Bitcoin rolling net exchange flow (second halving vs. the third). Source: Coinmetrics
Traders see the decrease in Bitcoin’s supply and increased “hodling,” as additional catalysts for a liquidity crises and greater price upside.
Related: Bitcoin heavy breakout fractal suggests that the Bitcoin price could hit $250K-$350K by 2021
Ecoinometrics noted that there were periods of net outflows back then, but they looked much smaller than the current situation.
“This is another indication that we are on the verge of a liquidity crisis, which could drive Bitcoin’s price much higher than it currently is.” You should do your research before making any investment or trading decision.