{"id":357452,"date":"2021-10-25T02:35:00","date_gmt":"2021-10-24T23:35:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k\/"},"modified":"2021-10-25T02:35:00","modified_gmt":"2021-10-24T23:35:00","slug":"is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k\/","title":{"rendered":"# Is excessive bullish optimism behind Bitcoin\u2019s drop below $60K?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a28e48bb0ec0\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a28e48bb0ec0\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k\/#Bearish_events_can_also_be_anticipated\" >Bearish events can also be anticipated<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k\/#The_futures_premium_was_not_%E2%80%9Cexaggerated%E2%80%9D\" >The futures premium was not &#8220;exaggerated&#8221;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/is-excessive-bullish-optimism-behind-bitcoins-drop-below-60k\/#Liquidation_risks_were_also_not_%E2%80%9Cimminent%E2%80%9D\" >Liquidation risks were also not &#8220;imminent&#8221;<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Is excessive bullish optimism behind Bitcoin\u2019s drop below $60K? <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>Bitcoin (BTC) has a long history of forming local tops when events that are anticipated by the market occur. The recent Bitcoin exchange-traded fund (ETF) launch on Oct. 19 was no different and led to a 53% monthly rally to an all-time high at $67,000.<\/p>\n<p>Now that the price has briefly fallen below $60,000, investors are attempting to understand if the 10% correction was a healthy short-term profit taking or the end of the bull run. To determine this, traders need to analyze BTC&#8217;s previous price activity to evaluate the possible similarities.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-10\/885dc151-c951-4f3c-b159-460a01a9b0e5.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin price in USD. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>The chart above depicts the day of a New York Times headline announcing that &#8220;<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/indianexpress.com\/article\/news-archive\/web\/bitcoin-gets-cautious-nod-from-chinas-central-bank\/\" data-amp=\"https:\/\/indianexpress-com.cdn.ampproject.org\/c\/s\/indianexpress.com\/article\/news-archive\/web\/bitcoin-gets-cautious-nod-from-chinas-central-bank\/lite\/\">Bitcoin gets cautious nod from China&#8217;s central bank<\/a>&#8221; in November 2013. At the time, Yi Gang, the deputy governor of the People&#8217;s Bank of China (POBC), said that people could freely participate in Bitcoin&#8217;s market. He even mentioned a personal view that suggested a constructive long-term perspective on digital currency.<\/p>\n<p>It&#8217;s also worth mentioning that this favorable <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a> coverage on Chinese state-run television aired on Oct. 28, and it showed the world&#8217;s first Bitcoin ATM in Vancouver.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Bearish_events_can_also_be_anticipated\"><\/span>Bearish events can also be anticipated<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Bearish examples can also be found throughout Bitcoin&#8217;s 12-year price action. For example, the April 2014 Chinese ban marked a 5-month price bottom.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-10\/e8062312-2751-48b2-a45a-f219889a3c41.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin price in USD. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>On April 10, 2014, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/article\/us-china-bitcoin\/china-bitcoin-exchanges-say-certain-banks-to-close-their-accounts-idUSBREA3A11J20140411\" data-amp=\"https:\/\/mobile-reuters-com.cdn.ampproject.org\/c\/s\/mobile.reuters.com\/article\/amp\/idUSBREA3A11J20140411\">Huobi and BTC Trade<\/a>, the two of China&#8217;s largest exchanges, said their trading accounts at certain domestic banks would be closed within one week. Once again, rumors had been circulating since March 2014, and this was fueled by a note on the Chinese <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> outlet Caixin.<\/p>\n<p>More recent events included the CBOE Bitcoin futures launch on Dec. 19, 2017, which preceded the infamous $20,000 all-time high by one day. Another event that marked a local top was the Coinbase IPO on Nasdaq when Bitcoin price reached $64,900. Both events are signaled on the following chart:<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-10\/a691c12a-d6e6-4017-a850-89bae6b1e3ca.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin price at Coinbase in USD. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>Notice how all of the above events were largely anticipated, even though some did not have a precise announcement date. For example, Bitcoin&#8217;s futures-based ETF&#8217;s Oct. 19 initial trading session was preceded by SEC&#8217;s Chair Gary Gensler&#8217;s statement on Aug. 3 that the regulator would be <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-08-03\/sec-s-gensler-signals-pathway-for-a-bitcoin-etf-with-tough-rules\">open to accepting a BTC ETF<\/a> <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lication using CME derivatives instruments.<\/p>\n<p>It&#8217;s possible that investors had previously positioned themselves ahead of the ProShares Bitcoin Strategy ETF launch and a look at BTC&#8217;s derivatives markets could possibly provide more insight into this.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_futures_premium_was_not_%E2%80%9Cexaggerated%E2%80%9D\"><\/span>The futures premium was not &#8220;exaggerated&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The futures premium, also known as the basis rate, measures the price gap between futures contract prices and the regular spot market. Quarterly futures are the preferred instruments of whales and arbitrage desks. Although it might seem complicated for retail traders due to their settlement date and price difference from spot markets, their most significant advantage is the lack of a fluctuating funding rate.<\/p>\n<p>Some analysts have pointed to the &#8220;return of the contango&#8221; after the bais rate reached 17%,which was the highest level in 5 months. <\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"und\" dir=\"ltr\"> <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/M7FNpnSRBV\">pic.twitter.com\/M7FNpnSRBV<\/a><\/p>\n<p>\u2014 Dylan LeClair  (@DylanLeClair_) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/DylanLeClair_\/status\/1450910112793731076?ref_src=twsrc%5Etfw\">October 20, 2021<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>In a normal situation, futures markets of any kind (soy, S&amp;P 500, WTIl) will trade at a slightly higher price versus the regular spot market. That happens mainly because the investor needs to wait until the contract expires to collect his payout, so there&#8217;s an opportunity cost embedded, and this causes the premium.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-10\/cfcfc859-052e-422d-8378-7b20aae45d03.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin 3-month futures annualized premium. Source: laevitas.ch<\/em><\/figcaption><\/figure>\n<p>Let&#8217;s assume one does arbitrage trades, aiming to maximize the funds held in USD. This trader could buy a stablecoin and get a 12% annualized yield using decentralized finance (DeFi) or centralized crypto lending services. A 12% premium on the Bitcoin futures market should be deemed a &#8216;neutral&#8217; rate for a market maker.<\/p>\n<p>Excluding the short-lived 20% peak on Oct. 21, the basis rate remained below 17% after a 50% rally month-to-date. As a comparison, on the eve of Coinbase&#8217;s stock launch, the futures premium skyrocketed to 49%. Therefore, those naming the current scenario as somehow excessively optimistic are just wrong.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Liquidation_risks_were_also_not_%E2%80%9Cimminent%E2%80%9D\"><\/span>Liquidation risks were also not &#8220;imminent&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Whenever buyers are overconfident and accept a steep premium for leverage using futures contracts, a 10% to 15% price drop could trigger cascading liquidations. However, the mere presence of a 40% or higher annualized premium does not necessarily translate to an imminent crash risk because buyers can add margin to keep their positions open.<\/p>\n<p>As the main derivatives metric shows, a 10% drop from the $67,000 all-time high on Oct. 20 was not enough to cause any sign of worry from professional traders as the basis rate stood at a healthy 12% level.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/is-excessive-bullish-optimism-behind-bitcoin-s-drop-below-60k\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Is excessive bullish optimism behind Bitcoin\u2019s drop below $60K? &#8221; Bitcoin (BTC) has a long history of forming local tops when events that are anticipated by the market occur. The recent Bitcoin exchange-traded fund (ETF) launch on Oct. 19 was no different and led to a 53% monthly rally to an all-time high at&#8230;<\/p>\n","protected":false},"author":1,"featured_media":357453,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDYvYzI3MzlmNWItZWE1NC00NWYyLTkyZjEtZjVkNzg1OTk2ZTI3LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74972,74937,74858,74982,95832,74863,74860,75012,75849,75591,74939,74898,73785],"class_list":["post-357452","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-futures","tag-bitcoin-price","tag-bitcoin-regulation","tag-btc-markets","tag-cboe","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-derivatives","tag-etf","tag-huobi","tag-market-analysis","tag-sec","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/357452","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=357452"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/357452\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/357453"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=357452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=357452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=357452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}