Bitcoin traders say $43,600 needs to be regained to restore the bullish uptrend, but BTC futures and options data are showing signs of distress.
Don’t fight the trend” is an old saying in the markets, and there are other variants of the phrase like “never catch a falling knife.” The bottom line is that traders should not try to anticipate trend reversals, or even worse, try to improve their average price while losing money.
It really doesn’t matter whether one is trading soy futures, silver, stocks or cryptocurrencies. Markets generally move in cycles, which can last from a few days to a couple of years. In Bitcoin’s (BTC) case, it’s hard for anyone to justify a bullish case by looking at the chart below.
Over the past 25 days, every attempt to break the descending channel has been abruptly interrupted. Curiously, the trend points to sub-$40,000 by mid-October, which happens to be the deadline for the United States Securities and Exchange Commission decision on the ProShares Bitcoin ETF (Oct. 18) and Invesco Bitcoin ETF (Oct. 19).
According to the CoinShares weekly report, the recent price action triggered institutional investors to enter the sixth consecutive week of inflows. There has been nearly $100 million worth of inflows between Sept. 20 and 24.
Experienced traders claim that Bitcoin needs to reclaim the $43,600 support for the bullish trend to resume. Meanwhile, on-chain data points to heavy accumulation, as the falling exchange supply has been dominant.
Perpetual futures show traders neutral to bearish
To gauge investor sentiment, one should analyze the funding rate on perpetual contracts because these are retail traders’ preferred instruments. Unlike monthly contracts, perpetual futures (inverse swaps) trade at a very similar price to regular spot exchanges.
The funding rate is automatically charged every eight hours from longs (buyers) when demanding more leverage. However, when the situation is reversed, and shorts (sellers) are over-leveraged, the funding rate turns negative, and they become the ones paying the fee.