Bitcoin Rally Following Trump’s Win Starts to Slow Down in Derivatives Market: What Lies Ahead?

The significant surge in Bitcoin (BTC) value following President Trump’s recent electoral win is beginning to decelerate, particularly within the derivatives segment, as highlighted by the cryptocurrency’s retreat below the $90,000 threshold on Thursday.

Substantial Liquidation Observed in Bitcoin Markets

Bloomberg statistics reveal that the premium on Bitcoin futures listed at the CME—a preferred instrument among institutional investors for price speculation—has reduced, suggesting a change in market attitude.

The K33 Research group has found that the spread, namely the divergence between futures pricing and spot pricing of Bitcoin, has lessened to about 10% after maintaining levels between 13% to 16% post-election.

Further Reading

Vetle Lunde, who leads research at K33, stated, “Markets appear to be calming down… this might hint at more conservative risk profiles.” These developments imply that traders might be reconsidering their tactics because of the recent price fluctuations.

Bitcoin is currently trading at $87,970, descending from its peak of $93,462 just the day before. Since Trump’s election triumph, the digital currency has increased by over 30%.

The robust rally was met with a significant sell-off of leveraged long positions. In the last day, liquidated long positions—bets on rising prices—reached $447 million, in contrast to $207 million for short positions.

Revived Interest from Traders

Profit-taking activities are influencing the pullback, especially as Bitcoin neared the $90,000 benchmark, which is a critical level for call options’ open interest.

According to James Davies, the CEO of Crypto Valley Exchange, “We’re seeing wild speculative activity in the market, major gains are being banked in recent hours… the $90k mark is hugely pivotal in call options open interest.”

The uptick has been largely driven by fresh demand in the spot market, as shown by heavy inflows into Bitcoin-backed ETFs and relatively restrained leverage amongst investors.

Interestingly, after an earlier decline, the funding rates for perpetual Bitcoin futures on offshore exchanges have increased, signaling traders’ renewed interests following the “Trump trade” hype.

Additional Reading

Optimism is growing amongst options traders, with a noticeable upswing in call purchases at the $110,000 and $120,000 strike prices according to Deribit data. As Davies mentions, “The current speculation is intense, expect continued volatility and ambiguous signals for some time while pending policy announcements in the U.S.”

With the coming expiration of November options, speculators are closely monitoring whether the $90,000 price level will act as resistance or if Bitcoin will once again surpass this mark.

Featured image from DALL-E, chart courtesy of TradingView.com