Key Indicators Say: Traders Still Bullish Despite Bitcoin Consolidation

Several indicators show that professional and retail traders are still bullish on Bitcoin even if the price fails to break above $20,000.

Aside from a brief test of $18,100 on Dec. 1, the Bitcoin (BTC) market has remained relatively quiet for a week. This suggests that investors are starting to realize that Bitcoin may be in for a longer period of consolidation after rallying 77% since October.

BTC/USD 4-hour chart

Source: TradingView

Whenever the price of Bitcoin stabilizes, there is always a growing expectation of an altcoin rally. But that hasn’t been the case recently, with bitcoin’s dominance increasing by 0.8% this week to 63.6%.

The move suggests that investors are either waiting for a break above the $20,000 resistance level or fearing possible negative price action. Therefore, this movement indicates that their confidence in the altcoin has weakened.

UAE Economy Minister: Cryptocurrencies and Asset Tokenization Key to Doubling GDP: United Arab Emirates Economy Minister Abdulla Bin Touq Al Marri told a panel at the World Economic Forum's Global Technology Governance Summit today that cryptocurrencies and asset tokenization Globalization will be key to the country's plan to double its GDP. Al Marri said the country wanted to increase GDP by 7 percent a year, which would allow it to double the size of its economy by 2030. Tokenization will be a key element of this effort, as "tokenization complements an information-based economy." (Cointelegraph) [2021/4/8 19:56:04]

Weekly Top 16 Cryptocurrency Performance

Source: Nomics & CoinMarketCap

Yfv Finance announced the completion of the audit of the YFV protocol: No key issues were found: Yfv Finance announced that The Arcadia Group has completed the audit of the YFV protocol within the estimated time. The audit was conducted by Minh Khai Do, an engineer at Arcadia, and the summary was conducted by Rasikh Morani and Joel Farris. The assessment identified a small number of low-severity issues related to code quality and health. No high-severity or critical issues were found.

On August 25th, the yfv Finance team announced that the team discovered a loophole in the YFV Staking pool yesterday, through which malicious participants can individually reset the YFV timer in the pledge. Currently, a malicious actor is trying to blackmail the team. In this regard, Yfv Finance decided:

1. Inform staking users to stop staking YFV in the current staking pool, and withdraw funds as soon as the timer allows.

2. Destroy the current YFV staking pool in the next epoch. This will equate to a 15% supply burn. If the community wants a new staking pool, the team will make a new migration plan as soon as possible.

3. The team has formulated a rescue plan for the funds currently trapped in the pool, but will not disclose them for safety reasons.

4. The development fund (about 300,000 YFV) will be used to compensate users affected by the timer reset attack. [2020/8/30]

The chart above shows how Bitcoin gained market share this week. With the exception of Nem (XEM), the rest of the altcoins are up 0.5%. Overall, trading volumes were disappointing, although this was partly due to Bitcoin hovering at $19,200.

Analyst: For currency prices, fixed supply is secondary, the key lies in the relationship between supply and demand: Cryptocurrency analyst Alex Krüger tweeted today that Ethereum is not as scarce as Bitcoin. Its supply doesn't even have a hard limit, yet ETH's price has risen more than Bitcoin. Contrary to popular belief, fixed supplies are secondary. The key is supply and demand. This is a fundamental principle of economics, but somehow it is often overlooked. A limited supply can increase the attractiveness of an asset and drive demand. However, it is demand, not supply, that is more likely to upset the supply-demand balance and drive up prices. Analyzing prices solely from the supply side represents a fundamental failure of speculation. [2020/8/1]

Whenever traders hesitate, they reduce their positions and wait for a better entry point. So this week's drop in volume is an adjustment, not a lack of interest.

Institutional Investors Accumulate BTC as Bitcoin Price Consolidates

Cryptocurrency fund Grayscale Investments continues to aggressively add bitcoin to its portfolio, with its bitcoin management size breaking the $10 billion mark.

Voice | V God: The relay registration burning mechanism is a key step in Ethereum’s privacy solution: V God reposted an article introducing the relay registration burning mechanism on Twitter. The purpose of this mechanism is to resist spam transactions. It establishes an arbitration registration mechanism on the second layer of Ethereum. Each transaction needs to pay a certain percentage of fees in sending broadcasts, and finally use min_percent to destroy it. Vitalik commented that after great progress in relay research, this is a key step in Ethereum's short-term privacy solution. [2019/7/18]

Grayscale invests in Bitcoin holdings

Source: bybt.com

In the past week, Grayscale has accumulated nearly 13,000 BTC, holding a total of 547,000 BTC. So, it's been another great week for the Grayscale Bitcoin Trust. The same excitement can be seen by analyzing its premium over the effective BTC held per share (currently 0.00095153 BTC).

Analysis | Loom: Gaming is the key to millions of users landing on Ethereum: According to /sludgefeed, Loom Network (Loom) recently released an analysis report on the current state of distributed applications (dApps), emphasizing that gaming will be the key to Ethereum. The key to widespread adoption of the (ETH) network.

In the report, Loom’s team details two major factors currently holding back mass user adoption of blockchain platforms: a lack of lethal dApps and UX, two issues that make dApps harder to use than centralized platforms.

These issues lead to poor dApp user numbers not only for Ethereum but also for other smart contract networks such as EOS. Loom concluded that games can solve two problems dApps currently face, as they can gain huge popularity in a saturated market. [2018/9/26]

Grayscale Bitcoin Trust Premium

Source: TradingView & Grayscale

As mentioned above, the Grayscale Bitcoin Trust premium increased to 22% from 11% in the previous week. The average premium for this metric over the past 90 days is 14%. Therefore, with the recent six-month high, this indicator reflects positive momentum. Funding fees for perpetual futures remain stable

Perpetual contracts (also known as inverse swaps) have an embedded rate, usually charged every eight hours. Funding rates ensure that there is no trading risk imbalance. Leverage can vary even if the open interest of buyers and sellers remains the same throughout.

If the price of the perpetual contract is significantly higher than the spot price at a certain moment, the longs need to pay the shorts. If the contract price is significantly lower than the spot price at a certain moment, the short position needs to pay the long position. This question is especially important during bull markets, which generally have more long demand.

A weekly interest rate above 2% suggests extreme optimism. This level is acceptable when the market rallies, but problematic if the Bitcoin price is sideways or in a downtrend.

In this case, high leverage on the buyer side increases the likelihood of large liquidations during unexpected price drops.

BTC Perpetual Futures Funding Rate  

Source: Digital Assets Data

Note that while the price of Bitcoin has stagnated, the weekly funding rate has remained at a healthy level. The data suggested that traders remained optimistic, even if they were not overleveraged.

There was also a brief moment of excitement in the early hours of Dec. 1 when Bitcoin tested the $19,900 level.

The funding rate can introduce some distortions as it is the preferred vehicle for retail traders and thus suffers from excessive leverage. Professional traders, on the other hand, tend to dominate long-term futures contracts with set expiration dates.

By measuring how much the futures trade at a premium to the general cash market, traders can judge for themselves how bullish they are. Futures typically trade at a premium of 0.5 percent or more to spot trades.

Whenever the premium turns negative, it's a warning red flag. This situation, also known as backwardation, indicates that the market is turning bearish.

January 2021 BTC Futures Premium

The above chart shows that this indicator briefly touched 2% on December 1, but then adjusted to 0.9% as Bitcoin failed to break through the $20,000 resistance level. Despite the decline, the premium remained above the minimum threshold of 0.5 percent, suggesting optimism among professional traders.

By gauging whether more activity is through calls (buying) options or puts (selling) options, one can gauge overall market sentiment. Generally speaking, calls are used for bullish strategies and puts are used for bearish strategies.

The puts-to-calls ratio is 0.70, indicating that there are 30% fewer puts than calls open interest and can therefore be considered bullish.

In contrast, a put-to-call ratio of 1.20 would indicate that there are 20% more puts than calls open, which could be considered bearish. One thing to note is that this indicator aggregates the entire Bitcoin options market.

BTC option put/call ratio

Source: Cryptorank.io

With the price of Bitcoin approaching $20,000, it is only natural for investors to seek downside protection. As a result, the put/call ratio peaked at 0.70 on December 2. Despite the increase, calls still outnumber puts by 30%.

After this euphoric period, the indicator has recovered to a healthy 0.63. Considering that 0.67 is the average of the past 3 months, this should be considered bullish as fewer and fewer investors are buying protective puts.

Overall, every key indicator discussed above is holding steady within expected ranges, especially given the market’s recent pullback to $18,100.

While Bitcoin remains above $19,000, investors may start to speculate on the possibility of Bitcoin hitting a new all-time high, and some may rush out to take profits.

Right now, none of the indicators are ringing alarm bells. While the absence of an altcoin rally during Bitcoin’s consolidation could dampen investor sentiment, the overall bullish sentiment remains.

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