Bitcoin (BTC) derivatives traders on the Chicago Mercantile Exchange (CME) missed out on incredible profits as the spot price of BTC topped $ 55,000 this week.
According to data shared by Ecoinometrics, retail investors reduced their long exposure to the Bitcoin futures and options markets in late September. The number of open short positions also increased, suggesting that derivatives traders were expecting the price of Bitcoin to decline, as shown in the chart below.
CME Bitcoin Derivatives – Retailers. Source: CFTC report “Trader Commitments”, Ecoinometrics
The data was taken on September 28, when the price of BTC on Coinbase fell below $ 41,000, nearly 23% less than its previous monthly high of nearly $ 52,950. The decline was due to China’s decision to ban all types of crypto transactions.
“This drop is most likely due to a combination of traders not moving their long positions to the October contract and liquidating some completely when it looked like BTC was going to drop below $ 40,000 last week,” Nick said. , an analyst at Ecoinometrics.
“Regardless, the big picture is that futures traders lack conviction.”
“This is paper hands 101,” said the analyst.
Institutional investors in the CME bitcoin futures market also followed retail sentiment as they reduced their long exposure to the market. On the other hand, their short positions increased.
Derivatives of CME Bitcoin: Smart Money. Source: CFTC report “Trader Commitments”, Ecoinometrics
With CME options traders convinced that the price of Bitcoin was going to fall, it turned out that the number of put options, an implicitly bearish bet on the price of Bitcoin, was almost twice the number of calls or bets on possible profits. the Bitcoin price.
CME Bitcoin Options: Put Options vs. Open Interest Calls. Source: Ecoinometry
The distribution of the dealer position made $ 40,000 the most desirable exercise price target.
On the flip side, some options traders are betting that Bitcoin’s spot price will hit $ 60,000 by the end of October. In addition, Crypto analyst Hedger highlighted that Bitcoin options expiring on Nov. 26 show that bullish sentiment is skewed towards the $ 80,000 target.
Buy / sell volume in the last 24 hours for the Bitcoin options contract dated November 26th. Source: Laevitas, Crypto Hedger
“At this current growth rate, Bitcoin has formed very strong support at the $ 50,000 price point and short-term traders may also need to look out for the important resistance level around $ 56,000,” said Konstantin Anissimov, CEO of CEX .IO. Add:
“A break below or above these levels could trigger another catastrophic price reversal or a massive run to $ 60,000 in the fourth quarter.”
Bitcoin supply comes into play
On-chain data shared by Ecoinometrics also showed higher levels of Bitcoin withdrawals from all crypto exchanges.
In detail, the 30-day net exchange flow of Bitcoin has increased since July 2020, as indicated in the color-coded graphic below, with blue and red indicating extreme exit and entry respectively.
Bitcoin Rolling Net Exchange Flow. Source: Coinmetrics
Ecoinometrics found that the amount of Bitcoin currently leaving the exchanges is higher than in previous four-year halving cycles.
Bitcoin net exchange inflow (second halving vs. third halving). Source: Coinmetrics
Meanwhile, traders see the reduction in Bitcoin supply on the stock exchanges with increasing “hodling” activity as additional catalysts for a liquidity crisis and further price increases.
Related: Bitcoin ‘Big Breakout’ Fractal Suggests BTC Price Could Hit $ 250,000-350,000 in 2021
“There were actually periods of net exits back then, but in terms of size they look a lot less dramatic than they do today,” noted Ecoinometrics, adding:
“This is another sign that we are on our way to a liquidity crisis that could drive the value of Bitcoin much higher than it is now.”
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