In the wake of Donald Trump’s victory in the US presidential election, Bitcoin (BTC) experienced a remarkable rally. However, recent trends suggest that this upward momentum is experiencing a slowdown, particularly within the derivatives market. This analysis explores the factors contributing to Bitcoin’s retreat below the $90,000 mark on Thursday, as well as emerging trader behaviors.
Bitcoin Experiences Significant Liquidation Activity
Recent data from Bloomberg reveals a shift in market sentiment, as evidenced by the reduced premium for CME-listed Bitcoin futures contracts. These instruments are widely used by institutional investors to speculate on price movements. K33 Research highlights a notable decrease in the basis—the difference between futures and spot prices—now at approximately 10%, down from the 13% to 16% range observed post-election.
Market Cooling: A Potential Shift in Strategy
Vetle Lunde, head of research at K33, commented on this development, stating, “Markets seem to be cooling down… that might have been a subtle hint of moderating risk profiles.” This observation suggests that investors are re-evaluating their strategies amidst recent price volatility.
Currently, Bitcoin is trading at $87,970, a decline from its all-time high of $93,462 reached just a day prior. Since Trump’s election victory, the cryptocurrency has experienced a significant increase of over 30%.
Impact of Liquidations on Market Movements
The rally has coincided with substantial liquidations of leveraged bullish positions. Within the past 24 hours, long position liquidations—those betting on price increases—totaled $447 million, surpassing the $207 million liquidated in bearish bets. This indicates a significant shift in market dynamics.
Renewed Trader Interest Amidst Market Adjustments
Profit-taking has also contributed to Bitcoin’s recent downturn, particularly as it approached the $90,000 mark—a historically significant level for call options open interest. James Davies, CEO of Crypto Valley Exchange, noted the speculative fervor in the market, stating, “Crazy speculative days in the market, big profit taking in the last few hours… $90k is a massive level in the call options open interest.”
Spot Market Demand and Trader Leverage
The rally has been largely driven by fresh demand in the spot market, with substantial inflows into Bitcoin-backed exchange-traded funds (ETFs) and relatively moderate leverage among traders. This dynamic has played a crucial role in shaping current market conditions.
Renewed Interest in Bitcoin Futures
Interestingly, the funding rate for Bitcoin perpetual futures on offshore exchanges saw an increase after a brief decline earlier in the week. This suggests renewed interest among traders following the so-called “Trump trade” catalyst. Options traders are expressing growing optimism, particularly in calls with strike prices at $110,000 and $120,000, as indicated by Deribit data. James Davies elaborated, “It’s all pure speculative trading right now, expect lots of volatility and a lack of clear signals for a while whilst we wait for policy announcements in the U.S.”
Anticipating Market Movements and Resistance Levels
As the market approaches the expiry of November options, attention is focused on whether the $90,000 price point will act as a resistance level or if Bitcoin can surpass it once again. This development will be closely monitored by traders and analysts alike.
