Traders are making use of multiple strategies to determine if the price of Bitcoin has reached the lowest point. However, derivatives data and on-chain activity hint at the precariousness of the situation.
How Far Off Is The Bottom For Bitcoin?
The biggest question facing Bitcoin traders is whether the cryptocurrency has hit the bottom. However, @noshitcoins suggests that further decline is a possibility.
Traders are trying to correctly pace the reversal trend that has been much-anticipated ever since BTC prices started its correction of 48% reaching $30000 on 12th May. The move resulted in long positions for the futures worth $12B being liquidated. As such, to date, the confidence of traders continues to be dampened.
The community began to search everywhere for signs that can indicate a reversal in the trend. For example, a few analysts claimed that a new higher high and a surge to $40000 will do the job. 2 days later, Bitcoin did break past $40000. However, it only remained there for 6 hours. Meanwhile, others deduced that the $30000 bottom needs to be retested before another bounce is possible.
Buyers can also get hold of more Bitcoin at fixed prices through call options with the expiration of contracts. Put options, however, give insurance to the buyers while providing protection against drops in prices. When professional traders and market makers lean bullish, a costlier premium is demanded on call options. The trend causes the indicator of delta skew to show -25%. Neutral is when a delta skew of 25% oscillates between a +10% and a -10%. Until 16th May, this balance was held. However, on the day, Bitcoin lost its $47000 critical support. It was held for more than two months.
Until this metric regains a pattern of neutrality which is close to the level of 5%, it is premature to claim that the bottom has been reached.
