Investors use various strategies to detect whether the Bitcoin price is bottoming out. On-chain activity and derivatives market data point to further declines.
Curve: professional indicator of “fear and ambition”
Call options allow buyers to buy Bitcoin at a predetermined price on the expiry date. Put options, on the other hand, act as insurance for sellers and provide protection against possible price drops.
When market makers and professional investors expect bullishness, the premium of call options increases. This trend leads to a 25 percent negative delta curve indicator. When protection on the downside is more costly, the curve indicator turns positive.
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A 25 percent delta curve between 10 percent negative and 10 percent positive is generally considered neutral. This balance was maintained until May 16, when Bitcoin lost the critical $47,000 support.
With the decline in the market, the 25 percent delta curve began to decline and the cost of protective options increased. Therefore, it would be premature to say that the market has bottomed out before the curve approaches the more neutral 5 percent level.
Active Bitcoin supply shows weak hands need to calm down
Investors are also watching the number of active BTC in the last period. This indicator cannot be viewed as positive or negative on its own, as it does not provide information on how old the addresses involved are.
The 500 percent rally in BTC price between October 1, 2020 and April 14, 2021, at $64,900, led to a massive increase in supply moved in the months before the rally. When this metric drops sharply, it reveals that investors are no longer interested in participating at the current price level.
2.2 million BTC have been active in the last 30 days, significantly higher than levels seen before October 2020.
In the current situation, investors should take into account that there may not be a bottom, at least until activity below $40,000 in the market declines.
The opinions and views expressed here are those of the author alone and do not necessarily reflect those of Cointelegraph. Every investment involves risk. Do your own research before making a decision.