Bitcoin Rally Post-Trump Victory Shows Signs of Cooling in Derivatives Market
The Bitcoin (BTC) rally following Donald Trump’s victory in the US presidential election is showing signs of slowing, particularly in the derivatives market, as the asset retreated below $90,000 on Thursday.
Bitcoin Experiences Significant Liquidation Activity
Bloomberg data indicates a decrease in the premium for CME-listed Bitcoin futures contracts, commonly used by institutional investors, suggesting a potential shift in market sentiment. K33 Research reports that the basis—the difference between futures and spot prices—has fallen to around 10%, down from 13% to 16% since the election.
Vetle Lunde, head of research at K33, noted that markets appear to be cooling down, indicating a reassessment of strategies amid recent price volatility. Currently, Bitcoin trades at $87,970, down from an all-time high of $93,462 reached a day prior. Since Trump's election victory, Bitcoin has increased over 30%.
This rally has led to significant liquidation of leveraged bullish positions, with long position liquidations totaling $447 million in the past 24 hours compared to $207 million for bearish bets.
Renewed Trader Interest
Profit-taking is contributing to the downturn as Bitcoin nears the $90,000 mark, a historically significant level for call options open interest. James Davies, CEO of Crypto Valley Exchange, mentioned substantial profit-taking as traders reacted to the $90k threshold.
The rally is primarily driven by fresh demand in the spot market, highlighted by inflows into exchange-traded funds (ETFs) backed by Bitcoin and moderate leverage among traders. The funding rate for Bitcoin perpetual futures on offshore exchanges rose after an earlier decline, indicating renewed trader interest post-election.
Options traders show increasing optimism, with rising interest in calls with strike prices at $110,000 and $120,000, according to Deribit data. Davies remarked that the current trading environment is speculative, leading to anticipated volatility and unclear signals until U.S. policy announcements are made.
As the market approaches November options expiry, focus will be on whether the $90,000 price point acts as a resistance level or if Bitcoin can surpass it again.
Featured image from DALL-E, chart from TradingView.com.