Bitcoin price trends have been quite dramatic throughout the year. After reaching its current all-time high of $126,000 in early October, the world's leading cryptocurrency began a steep decline. Since reaching its high in October, Bitcoin has fallen to $80,500, a negative deviation of more than 15% from the year-over-year growth rate.
Amidst this ostensibly bearish market sentiment, on-chain analysis was recently published that provides reason to believe that negative sentiment among investors may intensify.
Max pain point of $91,000 breached after option expiration on Friday
Crypto commentator GugaOnChain revealed the expiration of approximately $3.4 billion in Bitcoin options in a QuickTake post on CryptoQuant. This expiry event, which occurred on Friday, December 5th, is typically an event that causes a “gravity” that pulls prices together. In turn, prices tend toward a certain price level called the maximum pain point, where option buyers suffer maximum losses and sellers realize maximum profits.
In this scenario, the maximum pain point was approximately $91,000. As such, Bitcoin price fell rapidly towards this mark. However, by the end of the session, Bitcoin had already slipped under its “gravity” and reached a low of $89,500, entering a range that magnified losses for buyers while maximizing profits for sellers (market makers).
Negative funding rate further strengthens bearish view
GugaOnChain also references the “Bitcoin: Funding Rate” measurement, which tracks the average funding rate of all major perpetual futures exchanges. As explained by analysts, this indicator helps read general market sentiment. For example, a negative funding rate, such as the current reading of -0.001206, typically indicates that short traders are willing to pay out long positions. So it's clear that market sentiment is more bearish than bullish.
There appears to be consistency between negative funding rates and selling pressure driven by $3.4 billion in expiring options and a breach of the $91,000 maximum pain point. GugaOnChain explains that such a correlation further strengthens the theory that Bitcoin market prices could fall even more significantly.
While the long-term market direction may be clearly defined, short-term sentiment reflects a more subdued attitude of utmost caution. As of this writing, Bitcoin is worth approximately $89,250. In the past 24 hours, the top-tier cryptocurrency lost about 3.38% of its value, according to CoinMarketCap data.
Featured images from Shutterstock, charts from Tradingview
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