Bitcoin (BTC), which suffered a 5% drop on August 15, after it tested the $25,000 resistance, showed weakness. This move wiped out leverage long positions worth over $150 million and led traders to forecast a return to the $18,000 level.
This price action was accompanied by worsening market conditions for tech stocks like Tencent, a Chinese company that is predicted to record its first ever quarterly revenue decline. Analysts predict that the Chinese gaming and social media conglomerate will post quarterly earnings of $19.5 billion. This is 4% less than the previous year.
Citi’s investment bank reduced the Zoom Video Communications (ZM), recommendation to sell, and added that the stock was “highly risk.” Analysts said that ZM shares could have fallen 20% due to the challenging post-COVID environment and additional competition from Microsoft Teams.
Crypto investors continue to be plagued by bearish sentiment, as @ChrisBTCbull, an influencer and trader, stated. He also mentioned that traders were able to set sub-$17,000 targets after a simple rejection at $25,000
All CT began writing about #Bitcoin’s price $16k-17k. I believe it’s time for long#trading after #Bitcoin failed to break the $25000 mark.
— Chris (@ChrisBTCbull), August 16, 2022
Margin traders are bullish despite $25,000 rejection
The ability to monitor margin and options markets gives excellent insight into professional traders’ positions. A negative reading would occur if market makers and whales reduce their exposure to BTC as it approaches the $25,000 threshold.
Margin trading allows investors borrow cryptocurrency to increase their trading position and increases returns. One way to increase your exposure is to borrow stablecoins in order buy additional Bitcoin positions.
However, Bitcoin borrowers cannot short the cryptocurrency if they bet on the price falling. Contrary to futures contracts, the balance of margin longs and shorters is not always equal.
OKX USDT/BTC margin lending ratio. Source: OKX
The chart above shows that OKX traders have remained relatively stable at 14 and Bitcoin price rose 6.3% in just two days, only to be rejected when it surpassed the $25,000. resistance.
The metric is bullish and favors stablecoin borrowing by an extensive margin. Pro traders have been maintaining their bullish positions and there has not been any additional bearish margin trading. Bitcoin fell 5.5% on August 16.
Related: Bitcoin miners sell 27% less BTC in 3 months after major selling
Option markets maintain a neutral stance
Although it is uncertain whether Bitcoin will continue to climb towards the $25,000 resistance, the 25% delta skew indicates that arbitrage desks or market makers are charging too much for downside or upside protection.
The indicator compares similar put (buy) and call (sell) options. It will turn positive when there is fear because the premium for protective put options is higher than that of risk-taking call options.
If traders are worried about a Bitcoin price crash, the skew indicator will rise above 10%. Generalized excitement, on the other hand, reflects a negative 10% Skew.
Bitcoin 30-day options show 25% delta-skew: Source: Laevitas.ch
The 25% delta skew, which is shown above, has not moved much since Aug. 11. It oscillated between 5% to 7% most of its time. This range is neutral as options traders price the same risk of unexpected dumps or pumps.
Pro traders would have entered a “fear” sentiment if they had not been interested in providing downside protection.
The OKX margin lending rate, despite the neutral Bitcoin options indicator showed market makers and whales maintaining their bullish bets despite a 5.5% BTC decline on Aug. 16. Investors should expect another test of the $25,000 resistance once global macroeconomic conditions improve.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.