Bitcoin (BTC) showed strength on October 4 and 5, with a 5% gain on October 5 and breaking the $20,000 resistance. The move led to the liquidation of $75 million of short leveraged (bearish) positions and led some traders to predict a potential rise to $28,000.
As described by Mustache, the descending channel continues to exert pressure, but there may be enough strength to test the upper channel trend line at $21,500. The price action coincided with better global stock market conditions on October 4, with the S&P 500 up 3.1% and heavy Nasdaq Composite up 3.3%.
Curiously, the improvement in sentiment occurred while US job openings fell by 1.1 million in August, according to the US Labor Department. The drop was the biggest since April 2020, and indicated that the US Federal Reserve’s aggressive tightening monetary policy may end sooner than expected.
The general uptrend may have caused Bitcoin to break the $20,000 resistance, but that doesn’t mean professional investors are comfortable with the current price level.
Margin traders did not increase their long positions despite the rally
Monitoring the margin and options markets provides excellent insight into how professional traders position themselves. Margin trading allows investors to borrow cryptocurrencies to profit from their trading position. For example, one can increase exposure by borrowing stablecoins to buy an additional bitcoin position.
On the other hand, bitcoin borrowers can only short the cryptocurrency because they are betting that the price will fall. However, unlike futures contracts, the balance between long and margin positions is not always the same.
OKX USDT/BTC margin lending ratio. Source: OKX
The chart above shows that the margin lending ratio for OKX traders has remained relatively stable at around 12. Meanwhile, the bitcoin price has jumped 5% since October 3rd. Moreover, the scale remains bullish by favoring stable loans of currencies with a wide margin. As a result, professional traders keep bullish trades.
The options markets take a neutral stance
To understand whether Bitcoin will be able to maintain the $20,000 support, the 25% delta bias is a clear sign when arbitrage tables and market makers are protecting against a rally or a fall.
The indicator compares similar call (buy) and put (sell) options and will turn positive when fear spreads because the premium for call options is higher than for risky call options.
The bias indicator will move above 12% if traders fear the collapse of the bitcoin price. On the other hand, generalized excitation reflects a negative deviation of 12%.
30-Day Bitcoin Options Show 25% Delta Deviation: Source: Laevitas
As shown above, the delta deviation has been 25% higher than 12% since September 21st. It fell below that line on Oct. 3, indicating that options traders are pricing in similar risks to unexpected pumps or dumps.
When this metric is above 12%, it indicates that traders are fearful and reflects a lack of interest in offering bear protection.
Despite the neutral Bitcoin options index, the OKX margin lending rate showed that whales and market makers are maintaining their bullish bets following the 5% price increase in BTC on October 4.
Derivatives appear to reflect confidence in getting the $20,000 support, as investors show higher odds that the US Federal Reserve will ease into raising interest rates sooner than expected.