Given Bitcoin’s recent price action, and as many call it, quite a dramatic one, there has been a lot of activity in the market lately. While the spot market reacted quickly to this price rally, the options market also saw some interesting trends. However, the sharp difference between the trends seen in the options market before and after the price rally created some compelling contrasts in the room.
Now, a recent analysis by Ecoinometrics, which was conducted prior to Bitcoin’s 8% gain, had shown that the daily traded volume in the futures market remained very low, despite the open interest climbing to 40,000 BTC. The same is “nothing world-shaking”, so the same.
However, looking at a shorter-term chart for daily volume and open interest, it was noteworthy that the daily volume for Bitcoin futures peaked for the first time that month when BTC was rising. Daily volume was $ 1.87 billion while open interest on July 21 was $ 1.28 billion. In addition, the increase in daily volumes has more than doubled compared to the previous day.
It’s also worth noting, however, that once the uptrend calmed down, those numbers were also reflected, with volume falling shortly after when the OI stalled.
The aforementioned Ecoinometrics report also touched on a recent Commitment of Traders report that highlighted that the retail audience was “giving up the bull market.” It mentioned
“All hope is gone and some have even missed out. The result is a level of net positions that is almost as low as in the crash in March 2020. “
In addition, the excitement was easing in the options market too highlighted of Robinhood Markets, Inc. in its amended prospectus published earlier this week. According to the said document, revenues in the third quarter of 2021 would be lower compared to the second quarter as a result of “lower trading activity compared to the record levels of trading activity, especially in cryptocurrencies, in the three months ended June 30th”. , 2021. “
It’s worth noting here that, despite the 8% rise in price on the one-hour chart on July 21, Bitcoin failed to hold the $ 32,000 level. Bitcoin, which was trading at $ 31,798 at press time, had already fallen significantly from a local high of $ 32,8,000, a decline in line with the decline in OI and futures volumes.
On the contrary, it was a good sign that bitcoin futures short liquidations saw a sharp surge, their highest level since the beginning of this month. That could mean fewer people expect prices to drop further below $ 30,000. In addition, an increase in futures open interest corresponded with a slight increase in futures volume (for all exchanges), as shown in the following chart, before corrections brought the upward trend to a standstill somewhat.
While this short liquidation indicated a slight change in sentiment, the spread between Spot BTC and the futures is no longer what it used to be and we are still at 3 times the number of short contracts compared to Early 2020.
So the future of the futures market seems a bit blurry, at least for the time being. However, a look at the liquidation trend and the put-call ratios in the coming week as well as the futures volumes will better illustrate the scenario.