Bitcoin’s (BTC) massive rally following Donald Trump’s victory in the U.S. presidential election is starting to show signs of slowing, particularly in derivatives markets, as evidenced by the leading digital asset falling below the $90,000 mark on Thursday.
Bitcoin experiences massive liquidation activity
The premium on bitcoin futures contracts listed on the Chicago Mercantile Exchange (CME), often used by institutional investors to speculate on price movements, has fallen, according to data from Bloomberg, suggesting a possible shift in market sentiment.
K33 Research noted that the basis, or the difference between futures and spot prices, had been hovering between 13% and 16% since the election and has now fallen to around 10%.
“The market appears to be cooling off ... which could be a subtle hint of an easing of risk conditions,” said Vetle Lunde, head of research at K33. The shift suggests investors may be reassessing their strategies in light of recent price swings.
Currently, Bitcoin is trading at $87,970, down from its all-time high of $93,462 reached a day ago. The cryptocurrency has risen more than 30% since Trump won the election.
However, the rally has been accompanied by a massive liquidation of leveraged bullish positions. In the past 24 hours, liquidations of long positions betting on price increases totaled $447 million, while liquidations of bearish positions totaled $207 million.
Traders’ interest is rekindled
Profit-taking has also contributed to the recent decline, especially as Bitcoin approaches the $90,000 mark, which is historically an important level for call options open interest.
James Davies, CEO of Crypto Valley Exchange, noted that “there has been a lot of speculation in the market and a lot of profit taking in the last few hours… $90,000 is a huge level of open interest in call options.”
The rally was driven primarily by new demand in the spot market, as evidenced by large inflows into exchange-traded funds (ETFs) backed by bitcoin and relatively modest leverage among traders.
Interestingly, Bitcoin perpetual futures funding rates on offshore exchanges have risen after falling earlier this week, indicating renewed interest among traders following the so-called “Trump trade” catalyst.
Data from Deribit shows that options traders are increasingly optimistic, with growing interest in call options with strike prices of $110,000 and $120,000. As Davis commented, “This is a completely pure speculative trade at the moment, expect a lot of volatility and a lack of clear signals while waiting for US policy announcements”
As the market approaches the November options expiration, all eyes will be on whether the $90,000 price point will serve as resistance or if Bitcoin will be able to break through it once again.