Despite Bitcoin (BTC) trading below its 2023 high and struggling to stay above the $41,000 mark, traders remain optimistic, setting their sights on a $50,000 target and beyond. The impact of a $127 million liquidation of leveraged long Bitcoin futures on December 11 seems to have dissipated, as it represented less than 1% of the total open interest in the market.
While Bitcoin experienced a drop to the $40,200 area on Monday, it quickly rebounded in the following days. As of Wednesday, the price was up by 2.7% from the lows, showing strong resilience.
Stability in the Derivatives Market
Bitcoin’s recent correction appears to be less driven by derivatives markets than initially assumed. Instead, spot selling is attributed as one of the factors behind the correction. Analysis of the Bitcoin futures premium, or basis rate, reveals that it remained stable despite the price drop on December 11, remaining above 10%. In the market, a 10% futures premium is commonly seen as a sign of neutral to bullish sentiment.
Examining the BTC options market, specifically the 25% delta skew, further supports the notion of resilience. Despite the 6.1% correction since December 10, the options skew has maintained a neutral stance. This suggests a balance between bullish call options and bearish put options.
Role of Retail Traders
Interestingly, retail traders using leverage seem to have a healthy influence on Bitcoin’s price action. The positive funding rate for perpetual contracts, which indicates increased demand for leverage among long positions, experienced a modest increase from December 8 to December 10. This implies that long positions in Bitcoin futures and perpetual contracts did not solely drive the recent rally or subsequent liquidations. It is likely that the spot markets played a more prominent role.
Overall, the derivatives data remains positive, signaling that the bullish momentum surrounding Bitcoin is still intact. Traders now have their sights set on $50,000 as the next major price milestone.
