Why Bitcoin’s recent rebound may fundamentally change its trend?

Bitcoin’s strong rebound over the past six weeks has allowed it to erase nearly all of its losses since the start of its decline from highs above $10,500 in late February.

This resolute uptrend also gives it fundamental support as its market dynamics have changed significantly. Options data for the cryptocurrency now suggests that traders are positioning themselves to benefit from Bitcoin seeing further gains.

It’s been a wild year for Bitcoin, and the past few days have been no exception. About two days ago, BTC sparked an explosive upward momentum that took it from a low of $7,700 to a high of $9,500.

As it stands, the cryptocurrency is trending slightly lower as buyers continue to fight for a firm position within the $9,000 region.

This price action has dramatically altered the fundamental structure of cryptocurrencies, as data on their futures markets suggest that the way investors approach trading has changed significantly.

It now appears that most options traders now expect this uptrend to extend further in the days and weeks ahead.

One obvious “side effect” of the recent volatility in cryptocurrencies is the damage to futures and margin traders.

When Bitcoin dropped from the $8,000 region to as low as $3,800 in mid-March, futures traders were hit hard, with some experiencing single-day declines of more than 50%, forcing many of them to be liquidated or exit their positions.

Since this happened, open interest in Bitcoin futures has failed to rebound strongly, suggesting that many traders have been forced to exit or have exited the market entirely.

Data research platform Skew spoke about the situation in a recent tweet, publishing a chart showing how this price action is detrimental to futures traders.

Its tweet reads, "Futures open interest is still significantly lower than pre-sell-off levels on average. They said most longs were forced out on days with declines of more than 40% and can't get back in quickly enough."

This also coincided with the open interest of Bitcoin on BitMEX plummeting to a record low, indicating that margin traders were also adversely affected by Bitcoin’s huge volatility.

It now appears that options traders are looking forward to seeing a continuation of Bitcoin’s firm uptrend.

This is illuminated by the cryptocurrency’s put/call ratio, which Skew noted shows that investors’ interest in positioning for further gains is greater than their interest in declining.

“The put-call ratio has returned to parity, with Bitcoin’s open put/call ratio structurally below 1, with investors more willing to discuss and identify upside,” they noted, publishing the chart below.

This potential uptrend could be more sustainable than the trend of past months and years, as the withdrawal of futures and margin traders from emerging markets could help provide it with greater stability.

The original article comes from bitcoinist and was translated by the BluemountainLabs team. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.