$43K BTC flipping support? Not anytime soon, according to derivative metrics
Bitcoin (BTC) showed strength on March 22, posting a 5% gain and testing the $43,000 resistance. The move liquidated over $150 million worth of leverage short positions, those betting on a declining price using futures contracts.
Some Twitter analysts attribute the price improvement to the Do Kwon, the co-founder of blockchain protocol Terra. During a recent Twitter Spaces conversation with analyst Udi Wertheimer, Kwon revealed his plans to back the TerraUSD stablecoin with Bitcoin.
Terra's co-founder said "the current clip that we have to buy Bitcoin is about $3 billion and will add to that," causing markets to get agitated on March 21 when some observers attributed a $125 million Tether (USDT) transaction to Kwon.
Margin trading allows investors to borrow cryptocurrency to leverage their trading position, increasing returns. For example, one can buy cryptocurrencies by borrowing Tether and increasing their exposure.
On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn't always matched.
The above chart shows that traders have been borrowing more BTC recently, as the ratio decreased from 15 on March 20 to the current 7.5. Even though the data remains bullish as the indicator favors stablecoin borrowing, it reached the lowest level since March 9. Considering crypto traders are usually bullish, a margin lending ratio below 3 is deemed unfavorable. Thus, the current level remains positive, just less confident than two days ago.
Currently, it's somewhat difficult to discern a direction in the market. Still, the 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for
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