Two Bitcoin Charts That Show How Confused Crypto Traders Feel Right Now
If you feel confused over just what the price of Bitcoin is doing right now, you’re not alone: the pros can’t make up their minds either.
While Bitcoin has fallen just over 50% since April, many investors still refuse to believe we’ve entered a bear market. With venture capitalists investing billions of dollars into the crypto market, and new tech products constantly being developed by the industry, bullish vibes refuse to die.
But if more banks are now offering Bitcoin trading options, and more firms are buying up BTC as long-term investments or hedges against inflation, then why isn’t the price going up?
Even seasoned crypto traders are scratching their heads—but the answer to where Bitcoin goes next could just depend on how long you’re willing to wait, according to these two charts.
Chart 1: Investors expect Bitcoin at 20K by EOY
According to data from analytics provider (and recent Coinbase acquisition) Skew, Bitcoin options traders are very active in the $20,000 and $22,000 zone by December 2021. What that means is that these traders expect Bitcoin to continue to drop and fall as low as its 2018 high by the end of the year.
When buying a BTC option contract, the trader is betting that Bitcoin will hit a certain price by a specified date. As that date approaches, the trader must decide whether to exercise the option, sell the option, or simply do nothing and let it expire.
And right now, the most active price point for these contracts predicts that Bitcoin will drop to $20,000, which means that traders are expecting more pain over the next few months.
Monster prints from early this morning on Paradigm
31Dec 22k Puts trading 500x (500 BTC)
31Dec 20k Puts trading 500x (500 BTC)cleared on @DeribitExchange
Impossible to get liquidity on demand for this kind of size directly on the order-book! pic.twitter.com/vgMEWO78Jq
— Paradigm (@tradeparadigm) July 18, 2021
Monster prints from early this morning on ParadigmChart 2: Spot trading data gives hope to long-term bulls
For those still dreaming of a happy moon ending, however, the Bitcoin spot price chart (that is, the current market price for 1 BTC) shows a weakening of the downtrend as the weeks go by.
In simple terms, while the weekly price declines this year between April and July were so big they were scary, the price movements over the last few weeks have also been bearish but weaker. Those downward movements just aren’t as drastic as when they started earlier this year.
What this means, broadly speaking, is that traders aren’t in a hurry to dump their coins at these prices.
And if that is the case, holding out over the long run could be pretty profitable for BTC hodlers—something that options traders seem to agree with.
In more technical terms, all this behavior can be measured with one indicator: the ADX. This indicator doesn’t tell us whether a market is bullish or bearish, but it does measure whether a trend—whatever it is—is strong or not.
In the chart above, the ADX is represented by a white line, and it is going down, showing that the bears are getting more and more tired with every punch they throw.
If that’s the case, Bitcoin could be approaching a trend reversal.
All of that, of course, comes with the standard disclaimer: this is crypto, and no one really knows what’s going to happen next—so don’t feel so bad that you don’t either.
19 July 2021 20:10