Bitcoin (BTC<\/a>) price has tested the $16,000 resistance multiple times since the 25% crash that occurred between Nov. 7 and Nov. 9, and some critics will justify their bearish bias by incorrectly assuming that the failure of FTX exchange<\/a> should trigger a much broader correction.<\/p>\n It’s kind of annoying me that Bitcoin is still selling for $16k-ish, even in the wake of all of this FTX news. I mean I assume the volume is low, but what on earth will it take to properly crush this zombie “currency” back to its rightful value of nearly zero?<\/p>\n \u2014 Daniel Knowles (@dlknowles) November 18, 2022<\/a><\/p><\/blockquote>\n For example, Daniel Knowles, a correspondent at The Economist, says the 26th largest tradable asset in the world with a $322 billion market capitalization is \u201castonishingly useless and wasteful.\u201d Knowles also said that \u201cthere is still no logical case for specifically Bitcoin. It’s pure ponzi.\u201d<\/p>\n If you think it through, for outsiders, Bitcoin\u2019s price is the single most important indicator of success, regardless of its valuation surpassing secular companies such as Nestle (NESN.SW), Bank of America (BAC) and Coca-Cola (KO). <\/p>\n Most people\u2019s need for centralized authority over their money is so entrenched that cryptocurrency exchanges\u2019 success and failure rate becomes the gatekeeper and success benchmark, when in fact, quite the opposite is true. Bitcoin was created as a peer-to-peer monetary transmission network, so exchanges are not synonyms for adoption.<\/p>\n It is worth highlighting that Bitcoin has been trying to break above $17,000 for the past seven days, so there is certainly a lack of appetite from buyers above that level. The most likely reason is that investors fear contagion risks, similar to what was seen with Genesis Block, the last FTX-related victim<\/a> to halt service due to liquidity concerns. According to recent reports, the company announced plans to cease trading and shutter operations.<\/p>\n Bitcoin price is stuck in a downtrend, and it will be hard to shake it, but it\u2019s a fallacy to assume that centralized cryptocurrency exchange failure is the primary reason for Bitcoin\u2019s downtrend or a reflection of its actual value. <\/p>\n Let\u2019s look at crypto derivatives data to understand whether investors remain risk-averse to Bitcoin.<\/p>\n Fixed-month futures contracts usually trade at a slight premium to regular spot markets because sellers demand more money to withhold settlement for longer. Technically known as contango, this situation is not exclusive to crypto assets.<\/p>\n In healthy markets, futures should trade at a 4% to 8% annualized premium, which is enough to compensate for the risks plus the cost of capital.<\/p>\n Considering the data above, it is evident that derivatives traders flipped bearish on Nov. 9, as the Bitcoin futures premium entered backwardation, meaning the demand for shorts \u2014 bearish bets \u2014 is extremely high. This data reflects professional traders\u2019 unwillingness to add leveraged long (bull) positions despite the inverted cost.<\/p>\n To exclude externalities that might have solely impacted the quarterly contracts, traders should analyze the top traders\u2019 long-to-short ratio. It gathers data from exchange clients\u2019 positions on the spot, perpetual and fixed-calendar futures contracts, thus better informing on how professional traders are positioned.<\/p>\n There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.<\/p>\n Even though Bitcoin failed to break the $17,000 resistance on Nov. 18, professional traders slightly increased their leverage long positions according to the long-to-short indicator. For instance, the Huobi traders\u2019 ratio improved from 0.93 on Nov. 16 and presently stands at 0.99.<\/p>\n\n
Futures markets are in backwardation and this is bearish<\/h2>\n
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The longs-to-shorts ratio shows a more balanced situation<\/h2>\n
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