Fear

Bitcoin stays out of fear for 11 straight days as price tips near 24K

Bitcoin’s huge price surge in January has meant that 64% of Bitcoin investors are in profit, according to data from IntoTheBlock.

Bitcoin (BTC) has just clocked its 11th consecutive day outside the “Fear” zone in the Crypto Fear and Greed Index, cementing its longest streak out of fear since last March.

This comes as Bitcoin hit $23,955 at 8:10 pm UTC time on Jan. 29, its highest level of the year. It has since come back down slightly, to $23,687 at the time of writing.

Meanwhile, Bitcoin sentiment is currently sitting firmly in the “Greed” zone with a score of 61, its highest level since the height of the bull run around Nov. 16, 2021, when its price was about $65,000.

Bitcoin Fear and Greed Index over the last 12 months. Source: Crypto Fear and Greed Index.

However, despite Bitcoin’s strong resurgence in recent weeks, market participants continue to debate whether the recent price surge is part of a bull trap or whether there is a real chance for a bull run.

Regardless, the current rally has pushed a lot more BTC holders back into the green.

According to data from blockchain intelligence platform IntoTheBlock, 64% of Bitcoin investors are now in profit.

Those who first bought BTC back in 2019 are now — on average — back in profit too, according to on-chain analytics platform Glassnode.

The average first-time buy price for BTC investors in 2019 was $21,800, which means those investors are on average up about 9% at the Jan. 29 price of $23,687.

Related: Bitcoin eyes $25K as BTC price nears best weekly close in 5 months

Meanwhile, a Jan. 29 poll from crypto market platform CoinGecko has revealed that 57.7% of 3,725 voters believe BTC will exceed $25,000 this week, while only 21.2% of voters believe BTC is primed for a pullback below $22,000.

A CoinGecko poll on BTC price prediction for the upcoming week. Source: CoinGecko

The founder and CEO of Vailshire Capital, Dr. Jeff Ross, also provided a technical analysis of his own on Jan. 29, suggesting that a price surge toward $25,000 in the short term may be on the cards:

Other analysts have called for excited investors to taper some of their expectations, however.

Head analyst Joe Burnett of Bitcoin mining company Blockware told his 43,900 Twitter followers on Jan. 29 that BTC won’t reach and surpass its all-time high of $69,000 until after the next Bitcoin halving event, which is expected to take place in March 2024:

Macroeconomist and investment adviser Lyn Alden also recently told Cointelegraph that there may be “considerable danger ahead” with potentially risky liquidity conditions expected to shake the market in the second half of 2023.

Here’s why holding $20.8K will be critical in this week’s $1B Bitcoin options expiry

BTC bulls were liquidated in last week’s drop to $20,800, meaning even more downside could occur if this level fails ahead of this week’s $1 billion options expiry.

Bitcoin (BTC) experienced a 16.5% correction between Aug. 15 and Aug. 19 as it tested the $20,800 support. While the drop is startling, in reality, a $4,050 price difference is relatively insignificant, especially when one accounts for Bitcoin’s 72% annualized volatility.

Currently, the S&P 500’s volatility stands at 31%, which is significantly lower, yet the index traded down 9.1% between June 8 and June 13. So, comparatively speaking, the index of major U.S.-listed companies faced a more abrupt movement adjusted for the historical risk metric.

At the start of this week, crypto investors’ sentiment worsened after weaker conditions in Chinese real estate markets forced the central bank to reduce its five-year loan prime rate on Aug. 21. Moreover, a Goldman Sachs investment bank strategist stated that inflationary pressure would force the U.S. Federal Reserve to further tighten the economy, which negatively impacts the S&P 500.

Regardless of the correlation between stocks and Bitcoin, which is currently running at 80/100, investors tend to seek shelter in the U.S. dollar and inflation-protected bonds when they fear a crisis or market crash. This movement is known as a “flight to quality” and tends to add selling pressure on all risk markets, including cryptocurrencies.

Despite the bears’ best efforts, Bitcoin has not been able to break below the $20,800 support. This movement explains why the $1 billion Bitcoin monthly options expiry on Aug. 26 could benefit bulls despite the recent 16.5% loss in 5 days.

Most bullish bets are above $22,000

Bitcoin’s steep correction after failing to break the $25,000 resistance on Aug. 15 surprised bulls because only 12% of the call (buy) options for the monthly expiry have been placed above $22,000. Thus, Bitcoin bears are better positioned even though they placed fewer bets.

Bitcoin options aggregate open interest for Aug. 26. Source: CoinGlass

A broader view using the 1.25 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $560 million against the $450 million put (sell) options. Nevertheless, as Bitcoin currently stands below $22,000, most bullish bets will likely become worthless.

For instance, if Bitcoin’s price remains below $22,000 at 8:00 am UTC on Aug. 26, only $34 million worth of these put (sell) options will be available. This difference happens because there is no use in the right to sell Bitcoin below $22,000 if it trades above that level on expiry.

Bulls could secure a $160 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Aug. 26 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $20,000 and $21,000: 1,100 calls vs. 8,200 puts. The net result favors bears by $140 million.
  • Between $21,000 and $22,000: 1,600 calls vs. 6,350 puts. The net result favors bears by $100 million.
  • Between $22,000 and $24,000: 5,000 calls vs. 4,700 puts. The net result is balanced between bulls and bears.
  • Between $24,000 and $25,000: 7,700 calls vs. 1,000 puts. The net result favors bulls by $160 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

Holding $20,800 is critical, especially after bulls were liquidated in futures market

Bitcoin bulls need to push the price above $22,000 on Aug. 26 to balance the scales and avoid a potential $140 million loss. However, Bitcoin bulls had $210 million worth of leverage long futures positions liquidated on Aug. 18, so they are less inclined to push the price higher in the short term.

With that said, the most probable scenario for Aug. 26 is the $22,000-to-$24,000 range providing a balanced outcome between bulls and bears.

If bears show some strength and BTC loses the critical $20,800 support, the $140 million loss in the monthly expiry will be the least of their problems. In addition, the move would invalidate the previous $20,800 low on July 26, effectively breaking a seven-week-long ascending trend.

The views and opinions expressed here are solely those of the author and 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.

Crypto markets bounced and sentiment improved, but retail has yet to FOMO

The total crypto market capitalization is rising toward $1.25 trillion, but an assortment of metrics show retail and institutions are not ready to “ape.”

An ascending triangle formation has driven the total crypto market capitalization toward the $1.2 trillion level. The issue with this seven-week-long setup is the diminishing volatility, which could last until late August. From there, the pattern can break either way, but Tether and futures markets data show bulls lacking enough conviction to catalyze an upside break.

Total crypto market cap, USD billion. Source: TradingView

Investors cautiously await further macroeconomic data on the state of the economy as the United States Federal Reserve (FED) raises interest rates and places its asset purchase program on hold. On Aug. 12, the United Kingdom posted a gross domestic product (GDP) contraction of 0.1% year-over-year. Meanwhile, inflation in the U.K. reached 9.4% in July, the highest figure seen in 40 years.

The Chinese property market has caused the Fitch Ratings credit agency to issue a “special report” on Aug. 7 to quantify the impact of prolonged distress on a potentially weaker economy in China. Analysts expect asset management and smaller construction and steel-producing companies to suffer the most.

In short, risk asset investors are anxiously waiting for the Federal Reserve and Central Banks across the world to signal that the policy of tightening is coming to an end. On the other hand, expansionary policies are more favorable for scarce assets, including cryptocurrencies.

Sentiment improves to neutral after 4 months

The risk-off attitude caused by increased interest rates has instilled a bearish sentiment into cryptocurrency investors since mid-April. As a result, traders have been unwilling to allocate to volatile assets and sought shelter in U.S. Treasuries, even though their returns do not compensate for inflation.

Crypto Fear & Greed Index. Source: alternative.me

The Fear and Greed Index hit 6/100 on June 19, near the lowest ever reading for this data-driven sentiment gauge. However, investors moved away from the “extreme fear” reading during August as the indicator held a 30/100 level. On Aug. 11, the metric finally entered a “neutral” area after a fou-month-long bearish trend.

Below are the winners and losers from the past seven days as the total crypto capitalization increased 2.8% to $1.13 trillion. While Bitcoin (BTC) presented a mere 2% gain, a handful of mid-capitalization altcoins jumped 13% or more in the period.

Weekly winners and losers among the top-80 coins. Source: Nomics

Celsius (CEL) jumped 97.6% after Reuters reported that Ripple Labs displayed interest in acquiring Celsius Network and its assets which are currently under bankruptcy.

Chainlink (LINK) rallied 17% after announcing on Aug. 8 that it would no longer support the upcoming Ethereum proof-of-work (PoW) forks that occur during the Merge.

Avalanche (AVAX) gained 14.6% after being listed for trading on Robinhood on Aug. 8.

Curve DAO (CRV) lost 6% after the nameserver for the Curve.Fi website was compromised on Aug 9. The team quickly addressed the problem, but the front-end hack caused some of its users’ losses.

Market may have rallied, but retail traders are neutral

The OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100% and during bearish markets Tether’s market offer is flooded and causes a 4% or higher discount.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

On Aug. 8, the Tether price in Asia-based peer-to-peer markets entered a 2% discount, signaling moderate retail selling pressure. More importantly, the metric has failed to improve while the total crypto capitalization gained 9% in 10 days, indicating weak demand from retail investors.

To exclude externalities specific to the Tether instrument, traders must also analyze futures markets. Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Accumulated perpetual futures funding rate on Aug. 12. Source: Coinglass

Perpetual contracts reflected a neutral sentiment after Bitcoin and Ether held a slightly positive (bullish) funding rate. The current fees imposed on bulls are not concerning and resulted in a balanced situation between leveraged longs and shorts.

Further recovery depends on the Federal Reserve

According to derivatives and trading indicators, investors are less inclined to increase their positions at current levels, as shown by the Tether discount in Asia and the absence of a positive funding rate in futures markets.

These neutral-to-bearish market indicators are worrisome, given that total crypto capitalization has been in a seven-week uptrend. Investors’ distress over Chinese property markets and further FED tightening movements is the most likely explanation.

For now, the odds of the ascending triangle breaking above the projected $1.25 trillion mark seem low, but further macroeconomic data is needed to estimate the direction central banks might take.

The views and opinions expressed here are solely those of the author and 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.