As Bitcoin prices revert to the $41K “falling knife” zone, bears apply pressure

Bitcoin traders believe that $43,600 must be reclaimed to restore the bullish uptrend. However, BTC futures data and options data are showing signs for distress. The old saying “Don’t fight with the trend” is still popular in the markets. There are also other variations of this phrase such as “never catch the falling knife”. The bottom line is that traders shouldn’t try to anticipate trend reversals or, worse, try and improve their average price while losing more money. Markets move in cycles that can last anywhere from a few days up to several years. The chart below shows Bitcoin’s (BTC), price in USD at Coinbase. It’s difficult for anyone to justify a bullish case. Source: TradingViewEvery attempt to break the downward channel over the past 25 days has been stopped abruptly. Curiously, the trend points towards sub-$40,000 by mid October, which is the deadline for the United States Securities and Exchange Commission to decide on the ProShares and Invesco Bitcoin ETFs (Oct. 18 and 19 respectively). According to the CoinShares weekly report institutional investors were prompted to enter the sixth consecutive week with inflows, according to the CoinShares weekly reports. According to the CoinShares weekly report, there has been almost $100 million inflows between Sept. 20-24. Experienced traders claim that Bitcoin must regain the $43,600 support to resume its bullish trend. On-chain data shows that there has been heavy accumulation due to the falling exchange supply. Perpetual futures indicate that traders are neutral to bearish. This is because perpetual contracts are the preferred instrument of retail traders. Perpetual futures (inverse Swaps) trade at a similar price to regular spot trading, unlike monthly contracts. When buyers demand more leverage, the funding rate is automatically charged to longs (buyers). If the situation is reversed and sellers (shorts) become over-leveraged the funding rate becomes negative and they are the ones who pay the fee. Source: Bybt.comA neutral situation is one in which leverage longs pay a small fee. This fee can oscillate between 0% and 0.03% every eight hours, or 0.6% per week. The above chart shows a slight bearish trend since Sept. 13 when the funding rate was above the threshold of 0.03%. The put-to-call ratio favors bulls but the trend has changedUnlike futures, options can be divided into two segments. Call (buy) options enable the buyer to purchase Bitcoin at a fixed price by the expiry date. Generally speaking, these are used on either neutral arbitrage trades or bullish strategies.Meanwhile, the put (sell) options are commonly used as protection from negative price swings.To understand how these competing forces are balanced, one should compare the calls and put options open interest.Bitcoin options open interest put-to-call ratio. Source: Laevitas.chThe indicator hit a 0.47 bottom Aug. 29, reflecting the 50,000 BTC protective put stacked against the call (buy), options of 104k BTC. The gap has been decreasing since neutral-to-bearish puts contracts began to gain traction after Sept. 24’s expiry. However, the last two weeks have shown absolutely no signs that derivatives indicators are indicating any bullishness. It seems that bulls’ hope is clinging to the ETF deadline acting to break the current market structures. Risk is inherent in every investment or trading move. Before making a decision, you should do your own research.

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