October 25, 2021

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These 3 indicators flashed bullish before the recent Bitcoin price pump

In stock markets and the cryptocurrency industry, traders are always looking for a specific reason for an asset’s price action, which means it’s important to point out that correlation doesn’t imply causation.

While it may be easy to link a regulatory statement or pending legislation to the outcome of an asset’s price, there isn’t always hard evidence that these are the exact factors. Some indicators described below may be due to sheer luck, although the coincidence continues throughout history.

For example, Bitcoin (BTC) The October 1 $ 48,200 pump may have been linked to the September 30 remarks of US Federal Reserve Chairman Jerome Powell. When asked to clarify his comments on central bank digital currencies (CBDCs), Powell said the Fed has no plans to ban cryptocurrencies.

Another plausible reason for the current rally is Bitcoin’s 7-day period average hash rate jump to 145 exahash per second (EH / s), the highest level since the brutal crash in early June when the China’s mining crackdown has increased.

Finally, growing expectations of a Bitcoin Exchange Traded Fund (ETF) approval by the US Securities and Exchange Commission (SEC) may have played a pivotal role in traders’ recent bullish bets.

What is clear is that several factors could have pushed last week’s pump to $ 49,000, and today the bulls appear to be making an effort to raise $ 50,000. So let’s take a look at 3 indicators that gave a buy signal before the recent price movement.

UNI grabbed an offer after traders turned their attention to DeFi

Uniswap (UNI, left) versus Bitcoin (BTC, right). Source: TradingView

UNI, the decentralized exchange token for Uniswap, started just hours before the market resumed on October 1st. Altcoin began its price hike right around the time of the UTC monthly close, initially by 5% to $ 24.20 from $ 23. This move was followed by another 4% pumping to $ 25.20 three hours before. Bitcoin Escape above $ 45,000.

Curiously, DEX volumes began to rise after China imposed further restrictions on Bitcoin the previous week. A reasonable explanation for this move could be that investors are starting to understand that China’s stock would have no impact on trading volume. By migrating to DEX, governments’ ability to control or limit the adoption of cryptocurrencies is drastically curtailed.

The shorts on the derivatives exchanges have increased

Some exchanges provide useful information on clients’ net exposure by measuring their positions or by consolidating spot and derivative market data. For example, the long / short ratio of OKEx Bitcoin traders fell from 1.25 (in favor of long) to 0.72 (in favor of short) by 28% in less than two days.

It may seem counterintuitive at first, showing whales increasing bearish bets, but when market expectations are shattered, extreme price movements tend to occur. If most traders had expected a positive price change, the result would probably have already been reflected.

Long / short ratio of OKEx Bitcoin derivatives. Source: OKEx

Open interest in Binance futures has suddenly increased

Regardless of the underlying asset, a futures contract has long (buy) and short (sell) positions combined at all times. This means that there is no way to predict whether these investors are biased on one side or the other.

However, the sudden increase in open interest, which reflects the total number of contracts still outstanding, reflects confidence. The higher the notional involved, the higher the stakes.

Binance Bitcoin futures are open. Source: Binance

Note how, in the 4 hours leading up to the 6:00 UTC bull run, open interest peaked on both the perpetual USDT and the coin-based contract. Interestingly, even with the additional stakes of $ 400 million, Bitcoin’s price was not significantly affected until after the peak in open interest.

The truth is, one could never find out what exactly triggered the rally, but by observing similar trends in the future, traders may be able to predict price pumps. Of course, there is no guarantee that all three metrics will repeat themselves, but the cost of monitoring the data is minimal.

The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your research before making a decision.

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