Bitcoin Derivatives Spark Fury as ‘Overheated’ BTC Price Drops 3.5%
Bitcoin (BTC) crashed below $35,000 after Wall Street opened on November 2 as analysts warned of “overheated” derivatives.
Bitcoin will avoid post-Fed gains
Data from Cointelegraph Markets Pro and TradingView tracked the retreating BTC price as it erased the ground it had regained overnight.
An 18-month high of $35,968 was hit by Bitstamp before the biggest cryptocurrency consolidated – a process that was rallying at the time of writing.
It peaked on the back of encouraging language from US Federal Reserve Chairman Jerome Powell, who signaled in his speech that interest rate hikes could soon be halted.
The Fed chose not to change rates at its November 1 meeting of the Federal Open Market Committee, or FOMC.
“The latest indicators suggest economic activity expanded at a strong pace in the third quarter. Job gains remain strong, albeit modestly since the start of the year, and the unemployment rate remains low. Inflation remains elevated,” an accompanying press release said.
“The US banking system is healthy and strong. Tighter financial and credit conditions for households and businesses can weigh on economic activity, employment and inflation. The magnitude of these effects is uncertain. The Committee pays close attention to inflationary concerns.
As reported by Cointelegraph, $35,000 has quickly become a key BTC price support level to hold market participants once. The area above $34,500, meanwhile, is described as a “suitable” target for the area's lows.
#Bitcoin goes out and reaches highs every year.
Not a big difference, but as long as we stay above $34.8K, the next target is $36.5-37K. #Altcoins to follow. pic.twitter.com/3aCKwvoGXq
— Michael Van de Pop (@CryptoMichNL) November 1, 2023
Now down more than $1,000 from its highs, however, Bitcoin has been worrying some, especially in emerging markets.
Charles Edwards, founder of quantitative bitcoin and digital asset fund Capriol Investments, wrote alongside Capriol's own data that “all Bitcoin derivatives markets are overheated.”
This contains perps, futures and options. Goodbye there…”
In response, popular trader Skew agreed, arguing that BTC is now the market responsible for maintaining price strength.
“What you need to know when you're fixing up jobs these days,” he told X subscribers.
When derivatives heat up, this puts a focus on the spot market to support the current price and trend.
Analysis warns on liquidity “the rug will be pulled”
In its own analysis, it concluded that monitoring the input material indicators should be “caution” applied to the current Bitcoin trading environment.
Related: 4 Signs Bitcoin Is Starting Its Next Bull Run
Uploading a snapshot of liquidity in the BTC/USDT order book for the largest international exchange Binance, it warned that support levels could disappear quickly – a kind of “carpet pulling”.
At the time of writing for newcomers, access to liquidity was both $34,000 and $33,500.
#FireCharts shows that #BTC liquidity is once again moving through the order book.
Care must be taken when moving liquid barriers in this way, as this type of movement often results in absorption into the carpet.
You can reduce the risk of a seizure by waiting to buy to resume… pic.twitter.com/UCFNpiIoUe
— Material Indicators (@MI_Algos) November 2, 2023
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
