Bitcoin (BTC) crashing to $27,700 and rebounding seconds later was a shock for some and financial ruin for others, data shows.
According to on-chain analytics resource Glassnode, futures traders with long positions lost a total of $190 million on Binance alone in a single hour — the most in history.
One exchange, 60 minutes, $190 million
The figures underscore the current face of Bitcoin as it circles new all-time highs and together with Ether (ETH) becomes the hottest ticket of 2021.
Longs had seen almost unbridled success throughout much of December 2020 and into the new year, with upside seeing little in the way of resistance.
Despite warnings from various analysts that the bull run could not last uninterrupted forever, plenty of traders took on substantial risk, betting heavily on new highs continuing. In the event, $34,800 marked a definitive top, with BTC/USD subsequently shedding $7,000 in 24 hours, including $4,000 in under 60 minutes on Monday.
Bitcoin futures long liquidations (Binance) annotated chart. Source: Glassnode
The result for those who were overleveraged was plain to see.
“$190,000,000 (in long positions) were liquidated on #Binance within 10 minutes. Largest value to date,” Glassnode commented alongside a chart showing Binance liquidations.
Risk vs. reward
As Cointelegraph reported, last week, it was short positions that came in for mass liquidation as Bitcoin tore through $30,000 for the first time. That episode lost short traders a combined $100 million across exchanges.
“Get used to 5k dips as we go to $100k. Comes with the territory,” Samson Mow, chief strategy officer of Bitcoin technology firm Blockstream, summarized on Twitter as the volatility continued.
#Bitcoin is on track for its longest monthly winning streak since 2019 after touching a record above $28,000 over the weekend. https://t.co/RFpU0FKaj6 https://t.co/3XFTcMIOSf
Oops! UK govt borrowing climbs to a record $323bn in the first 8mths of the fiscal year. Britain facing its largest ever peacetime budget deficit. Budget deficit could be larger than 19% of GDP predicted by the Office for Budget Responsibility last month. https://t.co/WuMkfEcDwg https://t.co/ySvaEehbKI
Yesterday, bitcoin’s price set another all-time high, this time at $24,200 (Bitstamp). Nine days ago, the daily low was $17,565. Since hitting that level, the primary cryptocurrency had gone through a fantastic journey of eight consecutive daily green candles.
This is the longest period of consecutive daily green candles since June 2019’s bull run (8 candles). If today’s candle will close above $23,840, though a green candle, this will become the longest period since October 2013.
Back then, Bitcoin had gone through ten green days where the price increased from $121 to $147.
This fact can just emphasize how impressive this bull run is. Not many people expected a new all-time high even before 2021.
BTC Support and Resistance Levels To Watch
While bitcoin had entered a price discovery territory, where there is no actual resistance to the bullish side, we can rely on the top-yellow ascending line on the following daily chart.
This line was started forming mid-October and now lies around $24,500 – $24,600. Before that, the first resistance level for Bitcoin is the current ATH at $24,200.
Further above lies the psychological levels of $25,000 and $26,000.
As the RSI is getting near 80, there is a high probability of an incoming price correction.
From below, the first level of support now lies around today’s low at $23,000 – $23,200, along with the first green ascending trend-line.
Further below lies 0.236 Fibonacci Level around $22,250, followed by the 0.382 and 0.5 Fibonacci levels – $21,405 and $20,673, respectively.
Further below lies the previous all-time high of December 2017 at around $20,000.
Total Market Cap: $684 billion
Bitcoin Market Cap: $443 billion
BTC Dominance Index: 64.8%
*Data by CoinGecko
BTC/USD BitStamp 1-Day Chart
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The open interest on Bitcoin (BTC) options contracts has reached a new all-time high at $6.5 billion on Dec. 17. That figure represents a three-fold increase from 90 days ago and is proof that the market has grown significantly in the past 6-months.
Bitcoin options total open interest. Source: cryptorank.io
Investors must keep in mind that even though a $6.5 billion open interest is an impressive number, it doesn’t necessarily mean that professional investors are bullish or bearish.
Call options provide buyers with an opportunity to leverage without running the risk of liquidation. Meanwhile, put options are an excellent way to hedge against a potential future sell-off. Thus, both add to the total open interest seen in the current figure.
A more interesting fact to analyze is the options profile set to expire over the next 30 days completely differs from longer-term ones. Bitcoin’s 63% bull run since November certainly contributed to this distortion, as $22,000 and higher strikes were not frequent.
Therefore, such a sizeable open interest near the $16,000 strike can be explained by pre-rally market levels.
Deribit short-term BTC options open interest by strike. Source: genesisvolatility.io
Notice how after the recent rally, a decent volume has gone through $24,000 and $28,000, totaling 14,800 BTC contracts. Unlike the ultra-bullish call options above $32,000, these options are not cheap.
This means someone effectively paid up $1,200 for the opportunity to acquire Bitcoin for $24,000 on Dec. 25, less than ten days from the expiry. For a comparison, that’s ten times more than the $32,000 call option traded.
Although it’s still early to understand how professional traders are positioned for Friday’s Dec. 25 expiry, the premiums paid on these options seem excessive for such a short period.
Longer-term options are even more bullish
A very different pattern emerges when focusing exclusively on longer than 30-day expiries that favor ultra-bullish calls. Unlike short-term ones, these aren’t cheap regardless of requiring 70% or higher upside.
Deribit long-term BTC options open interest by strike. Source: genesisvolatility.io
This time around, the $36,000 strike dominates, followed by the incredibly optimistic $52,000 level. Those options require 40% or higher upside to 52,900 BTC contracts, totaling $1.2 billion in open interest.
The largest open interest position for the $36,000 call option stands at the Jan. 29 expiry. Those traded for as high as $690 a piece recently, thus not a cheap gamble available for anyone.
Instead of gauging investors’ optimism by how high call options have been bought, investors should turn to the skew indicator. One should keep in mind that ultra-bullish options are relatively cheap for 40 to 50 days calendar expiries such as Jan. 25.
Skew shows investors are less bullish
When analyzing options, the 30% to 20% delta skew is the single most relevant gauge. This indicator compares call (buy) and put (sell) options side-by-side.
A 10% delta skew indicates that call options are trading at a premium to the more bearish/neutral put options. On the other hand, a negative skew translates to a higher cost of downside protection, indicating bearishness.
According to the data shown above, the last time some bearish sentiment emerged was Nov. 26, while BTC crashed 15%, testing the $16,200 level. This was followed by a period of extreme optimism as the 30-20% delta skew surpassed 25.
This indicator is the most substantial evidence a trader interested in derivatives needs to recognize the current sentiment surrounding Bitcoin options. Whenever it surpasses 15, it reflects fear of potential price upside from arbitrage desks and professionals, and as a result is considered bullish.
Therefore, the recent adjustment to 10 from 15 points as Bitcoin reached a new all-time high at $23,888 indicates a healthy market where investors have yet to become overly optimistic.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
