Bitcoin price rallies to $19K, but analyst says a $17.3K retest could happen next

While professional traders utilized leverage to drive the pump, driving the price of Bitcoin price to a year-to-date high close to $19,000, derivatives data suggests reasons why the price of bitcoin may now retest $17,300.

The price of bitcoin BTC tickers down $23,829 has increased 15% over the last 13 days, and compared to bulls, traders’ bearish bets on BTC futures have been liquidated for more than $530 million.

The price of Bitcoin rose to its highest level since the collapse of the FTX exchange on November 8 after gaining $19,000 on January 12. The Consumer Price Index (CPI) estimate for December in the United States met consensus at 6.5% year-over-year, underscoring the fact that inflationary pressure probably peaked around 9% in June.

In addition, FTX lawyer Andy Dietderich stated that $5 billion in cash and liquid cryptocurrencies had been confiscated on January 11, stoking anticipation for a potential partial repatriation of customer assets. On January 11, Dietderich told a bankruptcy judge in Delaware that the business intended to sell non-strategic investments worth $4.6 billion.

To determine whether professional traders are enthused about Bitcoin’s climb to $19,000, let’s look into derivatives measures.

Margin use increased as Bitcoin price rallied to $18,300 and above

Margin markets reveal how professional traders are positioned, and some investors benefit from margin since it enables them to borrow cryptocurrencies to increase the leverage on their bets.

By borrowing stablecoins to purchase Bitcoin, for instance, one might increase vulnerability. However, because they are betting against the cryptocurrency’s price rising, Bitcoin borrowers can only short it. Contrary to futures contracts, the balance between long and short-margin positions isn’t always equal.

According to the following figure, OKX traders’ margin lending ratio significantly rose on January 11, indicating that they added leveraged long positions as Bitcoin climbed toward $18,300.

However, the total margin reversal, which occurred on January 12 and sent Bitcoin’s price to a low of $17,920, was more significant. This means that market makers and whales decreased their bullish bets utilizing margin markets.

At 21, the indicator heavily favours borrowing with stablecoins, showing that bears are hesitant to start margin short positions on Bitcoin.

Futures traders ignored the Bitcoin price pump

Externalities that may have just affected the margin markets are not included in the long-to-short statistic. Furthermore, it collects information from exchange clients’ holdings on spot, perpetual, and quarterly futures contracts, providing deeper insight into how professional traders are positioned.

Since there are sometimes methodological differences between different exchanges, readers should focus on trends rather than absolute numbers.

The long-to-short indicator shows that professional traders have maintained their leverage long positions despite Bitcoin breaking over the $18,000 barrier.

For instance, from January 9 through January 12, the ratio for Binance traders remained steady at 1.08. Top Huobi traders cut down on their leveraged long positions as the indicator went from 1.09 to the current 0.91. Last but not least, at crypto exchange OKX, the long-to-short ratio favouring longs marginally rose, rising from 0.95 on January 9 to the present 0.97.

Despite the price surge, futures traders lacked the confidence to add leveraged bullish positions.

As bitcoin soars in value again, here’s what to think about before you buy

  • You might be tempted to purchase some bitcoin given that it is now trading at an all-time high.
  • Here are some useful things to think about before you go.

That sets a record; the previous high for the virtual currency was $64,899 in April.

As a result, there can be an increase in temptation to purchase bitcoin.

According to experts, here are some helpful things to think about before you do.

1. FOMO typically backfires

Bitcoin millionaires’ success stories. the fact that, in less than ten years, the value of the digital coin rose from virtually nothing to over $64,000.

Naturally, hearing this causes many individuals to experience “FOMO,” or the fear of missing out.

According to Kent Baker, a finance professor at American University, investors frequently succumb to the social prejudice known as “herding.” In other words, people follow the herd because they think there is safety in numbers and everyone else must know more than they do.

According to Baker, such investors are typically mistaken on both points.

In actuality, everyone else in the crowd has the same unwarranted confidence in everyone else, with the same meager evidence to support it.

2. We can’t know its real value … or much else

The underlying valuation of a digital asset is “extremely tough” to comprehend, according to Bruce Mizrach, an economics professor at Rutgers University’s School of Arts and Sciences.

According to him, most equities at least provide a price-earnings ratio, which indicates how much investors are ready to pay for a firm about its earnings per share. You may use that number to assess if a firm is overvalued or undervalued.

With bitcoin, you’re more in the dark.

Because investors are attempting to evaluate equities without revenues, the ascent of cryptocurrencies is similar to the early phases of the internet boom, according to Mizrach.

3. Even suspecting it’s a bubble won’t help you

The majority of investors can define a bubble as what occurs when a good’s price much surpasses its true value. And many people who are thinking about purchasing bitcoin certainly believe that the price increase is mostly the result of hype and speculative activity.

But despite this, individuals continue to purchase assets because, in Mizrach’s words, “they expect prices to go much higher.”

And, he said, “they all think they can get out before the bubble bursts.”

Just keep in mind that everyone else is thinking the same thing.

By the time the majority of ordinary investors enter a growing investment, it’s frequently too late, according to Baker.

Having said that, investors would be wrong, according to Douglas Boneparth, certified financial advisor and head of Bone Fide Wealth in New York, to overlook the emergence of cryptocurrencies.

Sticking your head in the sand and assuming something is unimportant is absolutely a terrible approach, according to Boneparth. In actuality, you are seeing the creation of a completely decentralized financial system.

He advises individuals to learn as much as they can about the technology so they can decide if and how much they should invest in digital currencies.

The conventional wisdom from financial professionals that you shouldn’t invest more than 1% to 5% of your money in assets will hold for many people. Others could discover that their belief in innovation and tolerance for risk allows for more.

Bitcoin price could retest at $17,300

The margin data reveals that the scenario was only brief even if it demonstrates that substantial leverage was employed to push Bitcoin beyond $18,000. Most likely, following the incident, those expert traders increased their margin deposits and decreased their leverage. The statistic appears to be healthy since it shows that margin markets are not overbought.

Concerning the top trader’s long-to-short ratio, there is potential for more purchasing power even though there is no market for leveraged longs utilizing futures contracts.

In terms of derivatives, even if Bitcoin retests $17,300, the bulls shouldn’t be alarmed because the signs suggest that there isn’t much demand from short sellers and that purchasers aren’t using excessive leverage.

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