Bitcoin Futures Heating Up, Why BTC Traders Should Expect Volatility
October 26 2021 - 3:44PM
NEWSBTC
Bitcoin has been moving sideways during the day as it was rejected
north of $63,000. As of press time, BTC’s price trades at $62,698
with a 1% profit in the weekly chart. However, Bitcoin could see
some action in the short term. The benchmark crypto has been
rallying on the back of an increase in institutional demand and the
launch of the first BTC-linked ETFs in the U.S. Related Reading |
Why Bitcoin Needs To Clear $64K For Hopes of a Fresh Rally As a
consequence, Bitcoin went from the lows at $40,000 to a new
all-time high in less than a week. This caused a FOMO effect most
notoriously visible in the derivatives sector. As CryptoQuant
showed, the amount of leverage positions in this sector has been on
the rise since the end of September. Moving to a year high with
BTC’s price, the leverage ratio points to an excess which could be
reflected on the price action. The CEO of CryptoQuant Ki Young Ju
believes this excess in leverage is caused by new players, as it is
has happened historically when Bitcoin enters price discovery.
Usually, the market reacts with a sudden move to the opposite
direction of the majority of the overleverage position. Related
Reading | Brace For Impact: Wall Street Is Headed Straight For
Bitcoin, Says Analyst Whales and other major players try to shake
out these new traders and take advantage of the liquidity in the
market to make their own moves. In response to the possibility of
the current high leverage in Bitcoin futures been driven by Chicago
Mercantile Exchange (CME) futures Open Interest, Young Ju
clarified: This data doesn’t take into account CME futures. I think
CME users are new players joining this industry, which indicates
the market is over-leveraged by *existing* investors who are using
crypto exchanges. Folks who use CME might not have over-leveraged
positions. New BTC ETFs, Same Bitcoin Price Action The recently
launched Bitcoin ETF are backed by CME futures. Therefore, some
expects believe the platform could gain more relevance in the
future and have a bigger impact in BTC’s price. In case of
volatility, Bitcoin could find critical support at $60,000, as $840
million in futures contracts were purchased when BTC’s price was
hitting this mark, Young Ju said. As noted by research firm
Glassnode, the OI for the CME futures has increased by over 265% in
just a month. This points towards a moment of euphoria which has
favored the bears over the past months. Related Reading | Bitcoin
Funding Rates Touch Same Level As Early September, More Correction
To Come? However, the general sentiment around Bitcoin remains
positive as Glassnode reported. This demonstrated by the amount of
long-term investors that have stopped taking profits during BTC’s
most recent price rally.
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