Bitcoin market volatility sparks concern among investors as price declines unexpectedly, with traders buying the dip and anticipating a rebound.
Traders are buying the dip, lifting the perpetual futures long-short ratio according to Alexia Theodorou, head of derivatives at Kraken.
Bitcoin market volatility refers to the fluctuations in price that occur due to various market and economic factors.
These fluctuations can be sudden and significant, causing investors to lose or gain substantial amounts of money.
Research suggests that Bitcoin's price can drop by up to 50% within a short period.
This volatility is attributed to factors such as regulatory changes, security breaches, and investor sentiment.
According to data from the past five years, Bitcoin's average annual return on investment (ROI) has been around 20%, but with significant peaks and troughs in between.
The long-short ratio has improved to a record 0.8 on the exchange, indicating that traders are anticipating a rebound in the market. Despite the price drop below $88,000, Kraken has seen a surge in traders opening long positions on its BTC perpetual markets.
The price of Bitcoin is known for its volatility, with fluctuations in value occurring frequently.
On average, the price of Bitcoin can change by 10-20% in a single day.
This volatility is due to various factors, including market demand, global economic trends, and regulatory changes.
Since its introduction in 2009, the price of Bitcoin has experienced significant highs and lows, with a peak value of around $64,000 in April 2021.
Despite its unpredictability, many investors continue to be drawn to Bitcoin's potential for long-term growth.
‘This suggests traders could be anticipating a rebound and effectively ‘buying the dip,” Theodorou said in an interview. ‘While evidence of dip demand on Kraken is an encouraging sign for the bulls, the long-short ratio remains below 1, meaning there are still more shorts than longs on the exchange.’
The record-high long-short ratio is a positive sign for the market, indicating underlying positive sentiment. However, liquidations remain at relatively normal levels, suggesting that excess leverage may still be present in the system.
Bitcoin market sentiment refers to the overall attitude and opinion of investors, traders, and users towards the cryptocurrency.
It can be influenced by various factors such as price movements, regulatory changes, and global economic events.
The sentiment can be gauged through social media, online forums, and financial news outlets.
A positive sentiment indicates a bullish market, while a negative sentiment suggests a bearish trend.
Market sentiment analysis is crucial for investors to make informed decisions and navigate the volatile cryptocurrency market.
‘This could potentially leave the market vulnerable to further downside moves, possibly in the shape of a long squeeze, in the near-term,’ Theodorou said.
The BTC decline follows a $1 billion increase in open futures position on Binance late Monday, most likely due to traders taking shorts in anticipation of a deeper price drop. However, bargain hunters have stepped in via Kraken, lifting the perpetual long-short ratio to a record high 0.8.
The ratio measures the proportion of buy positions open relative to active sell positions at any given time. The BTC spot price meltdown has led to risk-off sentiment, with Nasdaq futures pointing to continued risk aversion on Wall Street and the yen holding strong against the U.S. dollar and growth-sensitive commodity currencies like the Australian dollar.
The buying activity on Kraken is a positive sign for the bulls, but the market remains vulnerable to further downside moves. The record-high long-short ratio indicates underlying positive sentiment, but excess leverage may still be present in the system.
