Bitcoin (BTC) saw a decline below $35,000 after the opening of the Wall Street market on November 2. Analysts warned of overheated derivatives as a possible cause for the downturn. The largest cryptocurrency had reached new 18-month highs of $35,968 on Bitstamp before experiencing a consolidation phase.
These highs came shortly after a positive statement from Jerome Powell, Chair of the United States Federal Reserve, in which he suggested that interest rate hikes might soon come to an end. The lack of rate changes in the latest meeting of the Federal Open Market Committee on November 1 further fueled the bullish sentiment. However, the subsequent decline below $35,000 raised concerns among traders, especially in the derivatives market.
Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments, took to Twitter to express his concerns about the overheated derivatives markets. He stated that all Bitcoin derivatives markets were currently overheated, including Perps, Futures, and Options. Edwards cautioned traders to stay safe in such circumstances. The sentiment was shared by popular trader Skew, who emphasized the increasing dependence on spot markets to support Bitcoin’s price strength.
Another analysis from monitoring resource Material Indicators highlighted the need for caution in the current Bitcoin trading environment. It posted a snapshot of the BTC/USDT order book on Binance, showing support levels that were subject to rapid disappearance, commonly referred to as “rug pulls.” The snapshot revealed that newcomer support was gathering liquidity at $34,000 and $33,500, which could be helpful for traders as they determined their risk management strategies.
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The decline in Bitcoin’s price below $35,000 reinforced the importance of this support level, which had become a critical level for market participants to hold. Traders were closely watching the area above $34,500, considering it an ideal target for a local low.
It’s important to note that this article does not provide investment advice or recommendations. Traders and investors should conduct their own research and analysis before making any decisions.
In conclusion, Bitcoin’s decline below $35,000 after reaching new highs raised concerns among market participants. The overheated derivatives markets and the risk of rapid support level disappearances were highlighted as potential factors contributing to the downturn. Traders were advised to exercise caution and closely monitor spot markets for price support. Conducting thorough research and analysis is essential when engaging in cryptocurrency trading and investment activities.
