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Pirate Weekly Meeting | 2.19.2020




Pelosi, Kudlow Signal Market-Moving US Stimulus May Wait Till After Election: Report



U.S. administration officials and House Speaker Nancy Pelosi broached the possibility of passing the pandemic-relief package after the Nov. 3 election, indicating that a deal might not be able to be reached before then, the Wall Street Journal reported.


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Bitcoin Is About to Strike the $12K Mark All Over Again



Bitcoin is on the verge of hitting the $12,000 mark again. This would be the first time the currency has done so in about two months, with late August being the last time the price of the world’s number one cryptocurrency by market cap has come this close.

Bitcoin Is Once Again Heading for the Top

During that time, the asset rose as high as $12,400, though a historically bearish September would then set in and drag bitcoin down to the bottom of the financial ocean, taking its price all the way down to roughly $10,100 as early as September 2. From there, the currency would struggle to regain its previous momentum over the next four weeks, eventually reaching $11,000 again on September 19, though this spike would only last a few hours at most.

However, by the time October set in, bitcoin proved itself once again as the world’s number one digital asset and offered traders and investors everywhere another taste of its brilliant resilience. It once again jumped past $11,000 and has stayed there the entire month, and now, it looks like the five-figure territory we’ve grown to love is about to expand all over again.

The currency has risen by more than three percent in the last 24 hours, as previously, the currency was trading for just over $11,700. Now, at well over $11,900, it’s estimated that bitcoin could potentially reach $12,000 as early as tomorrow morning. Granted bitcoin can cross this line, many analysts believe that a major rally could occur – one that could potentially take bitcoin all the way to the $15,000 mark before the end of the year.

That would mark a massive change for 2020 in that we can end on relatively positive news. This whole year has been terribly marred by news of the spreading coronavirus pandemic, election confusion and a lot of other scares that have brought people’s confidence and self-esteem down, and it would be nice to see bitcoin return to form as a way of saying 2020 wasn’t for nothing. We’ll have to wait and see of course, but it looks like bitcoin is about to embark on another bullish path.

Some analysts are wondering what may have caused the sudden burst in bitcoin’s price. Many are claiming it had something to do with last Monday’s virtual meeting hosted by the International Monetary Fund. This meeting discussed cross-border payments and saw the likes of Federal Reserve Chairman Jerome Powell in attendance, who claims that the central bank is presently looking into the benefits of a centralized digital currency.

Countries Can’t Seem to Agree

The meeting was discussed by Mati Greenspan of Quantum Economics fame, who stated:

Comments from Jerome Powell and the other participants made it clear just how far apart the various countries are when it comes to CBDCs.

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Pro traders added to shorts as Bitcoin price broke $12K — Data shows



As Bitcoin (BTC) breaks the $12,000 resistance, derivatives markets are flirting with overly excessive bullish sentiment. The futures basis and the options 25% delta skew both reached the same levels seen now on October 12 when BTC briefly tested $11,700 but failed to maintain momentum.

What differentiates the current situation from nine days ago is the positions of top crypto traders. On Oct. 12, these traders increased their longs, but during the recent move to $12,000 these professional traders are opening up short positions.

Despite this flip in sentiment, traders should not automatically conclude that today’s pump will turn into a flop exclusively based on the longs-to-shorts indicator. For starters, there is no way to know for sure how the top traders are positioned off-exchange.

For this reason, derivatives pricing is a better way to assess how bullish or bearish professional traders might be. This indicator focuses on the actual market conditions, whereas both the fear and greed and options put-to-call ratio are backward-looking.

Futures markets tend to trade at a slight premium to regular spot exchanges. This event is not exclusive to crypto markets but rather a derivatives effect.

The futures contracts premium (or basis) should range between a 5% to 10% annualized rate for healthy markets. Figures above this range denote excessive optimism, as traders bet on much higher prices. In the opposite situation, a negative futures contract premium indicates bearish sentiment.

BTC 3-month futures contracts annualized premium. Source: Skew

The above chart shows how the basis indicator has been flirting with over-optimistic levels, similar to what happened on October 12.

Traders should not mistake optimism with leverage as a positive funding rate on perpetual contracts is also needed to confirm this thesis.

The perpetual futures funding rate settles every 8 hours on most exchanges, and a fee is paid from longs (buyers) to shorts whenever the funding rate is positive. This situation would be the defining characteristic of overleveraged buyers, but that hasn’t been the case so far.

BTC perpetual contracts funding rate. Source: Digital Assets Data

The data above shows how volatile the funding rate has been, although there has not been any sustained funding periods. The standard measure for this indicator is 8 hours. Therefore a 0.05% rate is equivalent to 1% per week. The opposite holds for a negative funding rate when shorts are the ones paying it.

As for the BTC options market, there has been a similar movement as the 25% delta skew indicator entered the overconfident bullish territory. A negative skew indicates calls (buy) options cost more than similar puts (sell) options, thus indicating bullish sentiment. On the other hand, a positive skew suggests bearishness.

BTC 3-month 25% delta options skew. Source: Skew

Take notice how close the skew indicator is to its lowest levels in 6 months, indicating traders’ optimism. This situation is the same as October 12, when BTC gained 10% in 4 days. Although nothing is barring the skew indicator from remaining at the current level for extended periods, it is unlikely in BTC history.

After reading derivatives market indicators, one might conclude that professional traders are leaning bullish by adding long positions above $12K. Except, exchange-provided data on top traders long-to-short net ratios shows this hasn’t been the case.

Clients Long/Short Ratio. Source: Binance & OKEx

There are often discrepancies between exchanges’ methodologies, so readers should monitor changes instead of absolute figures. According to the above data, it is safe to say that top clients were either neutral or adding long positions ahead of Oct. 12.

On the other hand, there has been a sizable move in both exchanges over the past two days as top traders were more active on the sell-side when BTC approached $12K.

Therefore, regardless of derivatives indicators’ bullishness, these traders are signaling a lack of short-term optimism.

These seemingly opposing signals could reflect the recent 15% hike in two weeks, causing some traders to realize gains. Even though derivatives markets continue to favor a bullish trend, top traders appear to see no reason to add to long positions at the current levels.

Although the top traders call seems to have failed for now, they appear to be in no rush to FOMO at the current levels. Until these begin building some substantial long positions above $12K, this support level cannot be deemed strong enough.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.


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