Popular on-chain analyst Will Clemente monitors several key indicators that suggest there is a potential bear trap for in the near future Bitcoin could develop.
In a new edition of the weekly Blockware Intelligence Newsletter, Clemente examines derivative data to see if traders are overly optimistic or extremely bearish at BTC.
“We were cautious when we flushed two weeks ago, but we rolled the metric back to its lowest level since May earlier this year. Still in a healthy range overall, but I’ve started seeing a bit [open interest] Build-up since the flush.
Don’t think these are aggressive long positions as aggregate funding was subdued and even turned negative on Tuesday. “
Source: Blockware Intelligence
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 traders are not placing aggressively long positions, reducing the possibility of further market correction through a long squeeze, similar to December 4th.
Clemente adds that he sees a divergence between the illiquid supply shock ratio, which compares the movement of coins from liquid (weak hands) to illiquid (strong hands) units, and price.
“Would be fun for me to see this bullish divergence play out like the last two.
Simply watch the price action to confirm that it is happening. Patience is the key. “
Source: Will Clemente / Twitter
According to Clemente, the data he’s seeing from on-chain metrics and derivatives markets suggests that Bitcoin could be a big bear trap.
“The last time I asked for a major bitcoin short squeeze was on July 23, the day before we hit the summer lows.
We are currently not there, but the build-up is more likely [in my opinion]. “
While Clemente is considering the possibility of a Bitcoin rally, he also says that the 30-day moving average of the spend output profit ratio (SOPR) indicates that market participants are currently taking losses.
“The 1 threshold (black line) serves as the median between a profit and a loss status. In the lower area, market participants realize overall losses. When above, market participants realize total profits.
In 2017, BTC didn’t even drop below the threshold of 1 on 30DMA by SOPR, and once it was below it, it was consistently rejected on every retest of 1 on the bottom.
Source: Will Clemente / Blockware Intelligence Newsletter
Clemente says he will remain cautious on BTC until the SOPR rises above 1 to indicate that market participants are making a profit.
At the time of writing, Bitcoin is up 1.07% to stand at $ 47,502.
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Source: Crypto News Deutsch