Traders expect the price of Bitcoin (BTC) to decline when the amount of open interest on BTC derivatives approaches the $ 1 billion mark on an exchange. Margin trading and the spot markets have a close relationship today. Spot trading strategies must now take into account indicators relating to BTC derivatives, to anticipate bullish and bearish movements.
Derivatives and spots: the rates to watch
The derived products BTC have a growing impact on fluctuations in the price of Bitcoin.
The key indicators used by traders to gauge activity in derivatives markets are also gaining in importance.
The first indicator is the premium on futures contracts, a rate that ranges from 0.8% to 2.3% in a healthy market.
Another indicator to consider is the financing rate of perpetual contracts which guarantees the absence of imbalance at the level of exchanges.
This rate remains below 2% today, indicating investor optimism without buyers being in a situation of over-indebtedness.
And 2 more: risks and stakeholder strategies
The last 2 indicators relate to the call and put options. The 25% delta compares the equivalent put and call options.
Extreme situations show that investors are unwilling to take risks on either side. Normal variations are between -15% and + 15%.
The ratio between the call and put options, on the other hand, determines whether the market’s strategy is bullish or bearish.
Bitcoin Currently trading at $ 18,867 after hitting a new ATH on Dec 1, 2020, without hitting $ 20,000.
The BTC had suffered a crash on November 26, 2020, 5 days before the new ATH.
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.
Investors are behind the current bullish rally and could push Bitcoin towards the 6 digits. The gargantuan appetites of Grayscale, PayPal and Square, devouring much of Bitcoin’s outstanding offerings, shows a BTC whose price control has shifted from the hands of retail investors to institutional investors. The massive influx of institutional investors is increasing the volume of periodic transactions on derivative markets. Will spot traders soon have to submit to the “four wills” of margin traders? We are a long way from the image of the original Bitcoin created by Satoshi Nakamoto.
Litecoin, welcome in the Silver Age