Expectation of a year-high for Bitcoin is increasingly fading
Even with Bitcoin trading at a tight range in the past two months, expectations for a boost above $ 10,000 are bleak compared to the drop from this point on. Going for the price of futures and options contracts from now until the end of 2020, cryptocurrency is not seen in the best possible way.
According to a recent report by Ecoinometrics, the next phase of Bitcoin’s prospects for 2020 is twofold. First, the optimistic expectation is for positions to accumulate between $ 8,700 and $ 9,000, as traders predict more “side price action”. Second, and on the pessimistic side, Bitcoin “starts to fall”.
Following these two routes, the first would require an increase in open positions, which would need to be differentiated between an “accumulation phase”, that is, positions in the above mentioned range of US $ 8,700 – US $ 9,000, and a “real capitulation” phase. , that is, traders who close positions expecting a fall. In the past two months, the open interest (OI) on CME Bitcoin Futures has dropped from its $ 532 million ATH to its current value of $ 378 million.
The second perspective is “the direct feeling of despair”, with Bitcoin dropping to a low of $ 6,000 to $ 7,000, or even closer to the March 2020 level. If this more pessimistic future is realized, the report gives the following advice:
“Regardless, see it as an opportunity to buy the dive. Trust me, you never have cheap enough satoshis in your wallet.
Now that the paths have been drawn, the sentiment of traders in the market has introspection. The report, citing the most recent report from the CME Commitment of Traders [COT], suggested that he pointed to “a path to despair”.
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As previously exposed, CMI Bitcoin Futures’ OI fell 28.94%, which looks worse compared to the way the two most ardent classes of investors are looking at Bitcoin. Retail traders, despite long positions, are slowly changing their tune, as 50% of retail long positions fell from 2500 “max net long” to 1250 at the time of this writing. The report explained:
“Fewer open positions, along with long ones, disappearing at a high rate, is the path to despair.”
Although this means that the bullish sentiment is almost dead, looking at the data from CME Bitcoin Options, the “story that tells is not bearish”. While Bitcoin call options, or contracts to buy Bitcoin, decreased last month, there is no rush to buy put options or contracts to sell Bitcoin.
According to the report, this means that traders do not expect to profit much if Bitcoin falls. On the positive side, there is a decent coverage, that is, 13 purchase options for each sale. With very little concrete expectation of how Bitcoin will move, traders are not betting on Bitcoin, or rather, against it. In fact, traders still maintain their moderately high expectations for Bitcoin, rather than replacing them with low expectations. But some are still focusing on shorts, as is evident in the fall of OI.
But what does this mean for the market? This means that Bitcoin’s stability is not a bearish signal, but it is lessening the bullish expectations it accumulated during the April to May recovery period. And until a change in the market occurs, traders will not compile positions. The report concluded:
“So they’re just sitting around waiting for something to happen. And isn’t that what we’re doing at the moment? ”