Popular on-chain analyst Will Clemente Bitcoin (BTC) It looks at several key indicators that suggest a potential bear trap could emerge in the near future.
Speaking in the new edition of the weekly Blockware Intelligence Newsletter Will Clemente, traders scrutinized derivative data to see if BTC was overbought or overly bearish.
“Two weeks ago we were cautious as we went down, but we reset the metric to the lowest level since May since earlier this year. It’s still in generally healthy territory, but has started to gain some open interest since the heat.
Don’t think these are aggressive long-terms because the crowdfunding was muted and even turned negative on Tuesday.”
Open interest is the total number of active derivative contracts held by traders. Market participants use the data as an indicator of sentiment and trader bias. According to Clemente, derivatives data shows that traders do not place aggressive long positions, reducing the likelihood of another market correction through a long squeeze, similar to what happened on Dec.
Clemente also adds that he sees a discrepancy between the illiquid supply shock rate and price when comparing the movement of coins from liquid (weak investors) assets to illiquid (strong investors) assets.
“It would be pretty funny for me if this bullish divergence continues like the last two. I’m just watching the price action to confirm it’s playing. Patience is key.”
According to Clemente, on-chain metrics and data he has seen from the derivatives markets suggest that Bitcoin could place a major bear trap.
“The last time I called for a major Bitcoin short squeeze was on July 23, a day before it squeezed summer lows. We’re not at that level right now, but setup is becoming more likely [bence]”
Clemente a bitcoin rally While looking at the possibility, he said the 30-day moving average of the output profit ratio (SOPR) shows that market participants are currently making losses.
“The threshold of 1 (black line) serves as the median between the profit and loss status. When it is down, market participants collectively suffer. When it’s above, market participants make a profit in aggregate.
In 2017, BTC didn’t fall below the 1 threshold once in SOPR’s 30DMA, and once it did, it was consistently rejected from every bottom side retest of 1.
Clemente said he will remain cautious about BTC until the SOPR rises above 1 to indicate that market participants are in profit.
At the time of writing the news, Bitcoin is up 1.07%, trading at $47,502.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.