Biweekly Market Report (2019/12/02 ~ 2019/12/16)
7,286 (12/02) → 7,750 (12/04) → 7,388 (12/06)→ 7,340 (12/09) → 7,262 (12/14) → 7,089 (12/16) is a summary of the price movements of Bitcoin futures (BitMEX) for the past two weeks.
All price data were collected on 12/16 22:00.
BTC/USDT (Binance)
The market has been relatively deserted recently. Readers who have been in the currency market for a while should find that the currency market has been gradually falling this season — from the price of around $10,000 in early September to around 7,000 (red arrow in Figure 2). Outside of Xi Jinping’s endorsement effect (10/25), the price lines are in a slow bear trend. The most important thing is that the price has fallen below the annual line several times (11/23–12/14) (red circle in Figure 2).
Does this mean that the crypto market has quietly entered a cold winter? Not quite so. Compared to the trading volume of BCH hard fork at the end of last year, we believe that the activity level of the entire crypto market has only grown. The increase in activity level usually means that the fluctuation of selected targets will gradually decrease, while the reappearance of extreme scenarios such as breaking the $20,000-day price in 2017 and plunging 50% at the end of 2018 will become less likely to occur. When volatility stabilizes, traditional financial institutions’ and legal entities’ willingness to enter would increase, thereby raising effectiveness and intrinsic value of the crypto market.
Market Outlook
If we look at the historical data of BTC’s long and short positions from August to the present, we will find that the normal threshold falls between 0.9 and 1.6. As long as the market breaks through 1.6, it will usually be forced to pull back, resulting in a considerable decline (red dotted frame in Figure 3).
The current long-short position ratio is hovering around 1.2, within a normal range. Based on this factor alone, the crypto market does not appear bearish in the short term (but it also does not mean it will rise).
Next, we’ll observe the basis of OKEx perpetual contracts. The basis is the price difference between the derivative product (perpetual contract) and the spot (BTC), and the derivative product usually represents all investors’ opinions on the very short-term market outlook. Therefore, it has the characteristics of price discovery, that is, if the market is about to undergo large-scale fluctuations, we can find indicators more or less from the basis. See Figure 4 below to understand how basis predicts short-term prices.
Evidence 1:
From A, we can see that in the crazy bull market in June, the basis magnification was close to 100 points, and the price of BTC did hit a new short-term high of $12,845 in the next three days (Figure 4-A).
Evidence 2:
From B, we can see that the basis difference was enlarged between 10/20–10/22. The highest basis difference has also reached about 40 points, followed by the corresponding Xi Jinping’s endorsement effect. This shows that many have received inside information regarding the endorsement and they used long BTC perpetual contracts to catch the ride (Figure 4-B).
The current basis is at a normal level of 2.29, which means that the possibility of large-scale fluctuations in the short term is not high. Given the Figure above, the long-term break below the annual line, the shrinking trading volume, the number of long and short positions in the medium term, we believe that the overall market is bound to stay in consolidation unless special events disrupt the trend.
Bincentive’s Selected Strategies
Bincentive’s recent launch of BTC-based BinFi gives investors a new option for the crypto market winter. If you own a large number of BTC but you are a HODLER in the short term, BTC-based The Rock from BinFi is a great choice. The 12% fixed interest rate allows investors to earn competitive and stable interest for a good year.
This article expresses an independent view of Bincentive. Bincentive is not responsible for investment profits and losses, and investors should carefully consider various investment risks.
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