- BTC/USD shorts meanwhile nearing lowest levels
- BitMEX funding rate for Dec on track for the lowest high since March
- Open interest on CME Bitcoin futures registers an uptick but it’s “negative for potential realized volatility”
- Bitcoin can go to either $6,000 or test 10,000 level on a 3-month time horizon
Bitcoin is the best performing asset of not only 2019 but of the decade. If you would have invested $1 in Bitcoin in 2010, that would have been worth $100,000 today.
As such it makes sense that Bitcoin must be part of everyone’s portfolio as pointed by Weiss Crypto Ratings,
“Many Wall Street veterans are in agreement. The returns from stocks and bonds will be sluggish over the next decade. Time to add crypto to your savings plans.”
However, this is just starting. BTC/USD is currently trading at $7,069 on extremely low trading volume of just $150 million and is down 65% from its all-time high of $20,000.
And this is why traders are long on the world’s leading cryptocurrency. BTC/USD longs has actually climbed to its all-time high on Bitfinex.
BTCUSD Longs, Source: TradingView
However, crypto trader Josh Rager says people are over-focusing on this chart and giving it way more credit than it actually needs.
Because Bitfinex allows users to trade up to 3.3x leverage, this means BTC price would have to move down to mid to low 5ks minimal in order to liquidate these longs.
But Rager says it is “highly unlikely” that price will nose dive straight to $5k right now. On its way down, there would be several bounces in between.
To get an understanding of the sentiment and interest in the Bitcoin market, we need to pay attention to the BitMEX funding rate and open interest which he says are better indicators.
The Bitcoin funding rate on BitMEX for December is on track for the lowest high since March and in the tightest range since February.
In stark contrast to Bitfinex’s longs, the BTC funding rate on BitMEX is pinned at 0.03%. The number of times the rate has been pinned at 0.03% on a daily basis continues to rise still and in Q4 of 2019 it represented about 40.5% of observed periods, notes analyst Rptr45.
BTC/USD shorts, on the other hand, have reached almost to its lowest level. The has the Bitfinex L/S ratio also at an ATH but as Rptr45 points out without an obvious funding justification which was the case in previous break-outs as well.
BTCUSD Shorts, Source: TradingView
Meanwhile, there has been an uptick in open interest from the last few weeks on CME Bitcoin futures.
As per the Commitment of Traders (CT) report, the OI as of Dec. 12th has been only 116 million and on the lower end of the spectrum.
Digital asset advisory firm BitOoda views this as “negative for potential realized volatility in the short term.”
“Assuming the COT as OI for institutional investors and BitMex OI for retail and high net worth individuals, we could potentially see a set up to buy vol in the new year if the CME/Bakkt OI grows.”
This could help the futures market and further lead the way for realized volatility just like it has in the past. With the retail market already having a lot of exposure, the firm expects Bitcoin to either go back to $6,000 or test the 10,000 level on a 3-month time horizon.