Traders sold long Bitcoin futures contracts before the October price surge, despite strong on-chain fundamentals.
Bitcoin (BTC) futures traders on the Chicago Mercantile Exchange (CME) missed out on huge gains this week as the spot price of the cryptocurrency crashed past $55,000.
According to data supplied by Econometrics, retail investors decreased their long position in the Bitcoin futures and options markets in late September. As indicated in the chart below, the number of open short positions increased, suggesting that derivative traders expected Bitcoin’s price to fall.
The data were collected on Sept. 28, when the price of bitcoin had dropped below $41,000 on Coinbase, down about 23% from its month-to-date high of $52,950. The decline came as a result of China’s move to prohibit all types of cryptocurrency transactions.
The retail sentiment was mirrored by institutional investors in the CME Bitcoin futures market, who decreased their long stake in the market. Their short positions, on the other hand, rose.
Because CME options traders were persuaded that the price of Bitcoin would fall, the number of puts — an inherently negative wager on the price of Bitcoin — nearly doubled the number of calls, or bets on possible Bitcoin price rises.
The most sought-after strike price target was $40,000, thanks to traders’ position dispersion.
Some options traders, on the other hand, predicted that the spot Bitcoin price would reach $60,000 by the end of October. Furthermore, Bitcoin options expiring on November 26 show bulls’ attitude skewed toward the $80,000 strike level, according to analyst Crypto Hedger.
Ecoinometrics’ on-chain statistics revealed a greater amount of Bitcoin withdrawals from all crypto exchanges.
In particular, as seen in the color-coded chart below, Bitcoin’s 30-day net exchange flow has been increasing since July 2020, with blue and red representing severe outflow and influx, respectively.
The quantity of Bitcoin presently leaving exchanges is more than it was during the previous four-year halving cycles, according to Econometrics.
Meanwhile, traders view the decrease in Bitcoin supply on exchanges, as well as increased “holding” activity, as further drivers for a liquidity crisis and further price rises.