Bitcoin recovery is based on unstable ground, with BTC falling below $90,000

Source: PortaldoBitcoin Original Title: Bitcoin recovery is based on unstable ground, with BTC falling below US$ 90,000, says analysis Original Link: https://portaldobitcoin.uol.com.br/recuperacao-do-bitcoin-se-baseia-em-terreno-instavel-com-o-btc-caindo-abaixo-de-us-90-mil-diz-analise/ Bitcoin’s recovery over the past three weeks may seem optimistic, but a more detailed analysis of derivatives data shows a lack of demand. Investors’ appetite has struggled to recover since the leverage collapse on October 10.

The dynamics changed during the recent rally, in which Bitcoin rose nearly 15% from November 21 to December 9, reaching US$ 94,200. This increase coincided with a decline in open positions and stabilization in the accumulated volume variation, signaling that covering short positions, rather than new buying demand, was the main driving factor.

This reduction in bearish bets is even more evident through the improved delta options asymmetry of 25, which went from -11% to -5% in the same period, according to Deribit data. The delta bias between puts and calls measures the difference in implied volatility between out-of-the-money put and call options with the same expiration date.

A decrease in asymmetry indicates that investors are opening short positions, paying a premium for protection against losses. On the other hand, a recovery in asymmetry demonstrates an improvement in investor sentiment and may signal the formation of a potential bottom.

What’s next for Bitcoin?

The crucial question now is whether new buyers will emerge.

Open interest increased by nearly 4% since December 11, reaching 232,000 BTC, indicating increased speculation. If the accumulated volume also begins an upward trend, it will signal demand and could aid in Bitcoin’s recovery.

However, buying pressure has not yet manifested, as Bitcoin has lost nearly 5% since the peak of US$ 94,200 on December 9 and is currently trading around US$ 89,430.

Over the past week, there has been excessive leverage accumulation, with US$ 1.8 billion in short positions at risk of liquidation if Bitcoin surpasses US$ 91,300, according to CoinGlass’s liquidation map data.

If these sellers are liquidated, it could trigger a short squeeze. A short squeeze occurs when an asset’s price rises rapidly, forcing investors with short positions (bets on the decline) to buy the asset to cover their losses and exit the market. This additional buying pressure, coming from sellers who need to buy back the asset, creates a cycle that pushes the price even higher, resulting in a strong and sudden increase in the asset.

When short sellers cover their positions, they buy, triggering a reflexive rally. This could accelerate Bitcoin’s appreciation if sustained by growing spot demand, which has been absent since October 10.

There is concern about the ongoing risk resulting from the October 10 leverage collapse, meaning that “other agents may come to light.” On the other hand, “people have been selling their investments, trying to get rid of them in anticipation of the four-year cycle.”

Once these two forces are removed, analysts predict that the cryptocurrency markets could rise “substantially.” Until then, however, it is believed that price movements may be volatile until the end of the year.