Options data is bearish, PlanB is bullish. Where is Bitcoin heading at the end of the year?

Bitcoin options data suggests Bitcoin price could soon fall
After the price of bitcoin fell 17% in seven days, options market data showed investors were becoming increasingly cautious.
Market data from Skew shows that investors in the Bitcoin (BTC) options market are cautiously bearish in the short term as of September 8. The shift in sentiment comes after BTC plunged 17% over seven consecutive days.

Bitcoin fell below the $10,000 support level for the fourth consecutive day. Some market analysts said that the repeated testing of the same level is a bearish sign. Similarly, others said that Bitcoin has shown resilience at an important support level.

Why Bitcoin Options Market Data Correlation May Be Higher

In recent pullbacks, BitMEX has rarely seen liquidations of more than $50 million in a single long contract. Typically, when the price of Bitcoin drops by 5% to 15%, BitMEX tends to see liquidations of more than $80 million to $100 million. The lackluster liquidations on major futures exchanges stem from relatively low open interest. The term open interest refers to the total amount of short and long contracts open at a specific time.

Futures market data suggests that most of the selling pressure is not coming from gradual liquidations and blowups. Instead, large miners or whales taking profits from their holdings may be the main reason that triggered the sharp pullback since early September. Options data may become more important in the short term as futures markets have been stagnant.

Traders in the cryptocurrency market typically use two types of derivatives to trade Bitcoin: options and futures.

Total Bitcoin options open interest. Source: skew

While total open interest in Bitcoin futures has been declining, options open interest has started to recover since August 28. Skew researchers wrote:

Bitcoin options flow shows: short-term bearish, medium-term neutral, long-term bullish. The average data represents the current market consensus”

Where do traders expect BTC to go in the short term?

In the near term, traders are exploring three main areas: the Bitcoin whale buy level at $8,800, the $9,650 CME gap, and the $10,620 CME gap. Edward Morra, a cryptocurrency trader, explained:

“There is a new gap at 10620 on the CME chart, usually most gaps (~90%) get filled within a few days, exceptions (10%) take a long time (like your $9.6 gap from July). So it makes sense to assume that the bigger gap here at 10620 gets filled first, then we see how it goes.”

If Bitcoin sees a relief rally, it would fill both CME gaps and rally higher. But an anonymous trader going by the handle “Byzantine General” says there may not be enough shorts to trigger a bullish squeeze.

He said: People have been talking about "short squeeze". But the funding rate has dropped very quickly, and the funding situation is fundamental. It seems that there are no shorts that can be squeezed by the longs now? "

Bitcoin open interest across major futures exchanges. Source: Coinalyze.net

Declining open interest in the Bitcoin futures market and repeated testing of $10,000 support appear to have put Bitcoin in a short-term bear market. After falling 20% ​​in 23 days, it is questionable whether Bitcoin can see some recovery.

Plan B, creator of the S2F stock-to-flow analysis model: Bitcoin trading will be interesting in the coming months

PlanB, the Twitter analyst behind the widely cited S2F Bitcoin (BTC) value chart, described exciting times ahead for the asset.

“It’s going to be very interesting with Bitcoin four months away from the halving,” anonymous Twitter analyst PlanB said in a podcast interview with Peter McCormack on Sept. 4.

PlanB’s Stock-to-Flow (S2F) model has tracked Bitcoin’s price activity based on its halving events and has found regular price increases based on Bitcoin’s reduced inflation rate through halving of mining rewards. The model predicts that by the next halving, the price per Bitcoin will be close to $288,000.

Although PlanB said his S2F data is too broad, his personal view on the Bitcoin asset itself remains very optimistic. He said: "This is the solution to all the crazy depreciation and quantitative easing monetary policy, and Bitcoin is the best hedge." He pointed out that Bitcoin is the best choice to fight inflation and the problematic fiscal stimulus plans of governments around the world in response to the new crown epidemic.

PlanB also described the high demand for new assets such as Bitcoin from large players. The analyst mentioned that his company’s clients are large publicly listed companies that have been expressing interest in Bitcoin recently.

“We are now seeing interest from high net worth clients, Fidelity and all the big players, who are asking for an allocation to Bitcoin in their pension funds.”

Bitcoin has received a lot of attention from mainstream institutional players seeking to enter the industry in the wake of the economic turmoil caused by the coronavirus pandemic. However, some traditional analysts, such as gold expert Peter Schiff, remain firmly against Bitcoin.