Will Bitcoin repeat history turning September into a bull trap?

Bitcoin [BTC] price action has started September at a crossroads. The sideways price action over the past six days has traders wondering who will win between the bulls and the bears. The ongoing low volatility could be short-lived based on this analysis.

According to elcryptotavo, a pseudonymous analyst at CryptoQuant, Bitcoin is about to receive an influx of volatility. The analyst highlighted interesting observations in the derivatives segment. Those observations include an increase in derivatives reserves as well as a drop in open interest.

Source: CryptoQuant

An increase in derivatives exchange reserves is often considered a sign that addresses in the derivatives market are increasing their holdings.

Investors see a drop in open interest as a sign that the prevailing trend is losing momentum. In this case, Bitcoin had a bearish performance since mid-August.


Bitcoin funding rates and transaction fees mean the metrics also saw increased activity over the last four days.

Source: CryptoQuant

These observations confirm that buying pressure in the derivatives market is building. This could be a good opportunity for investors in the derivatives market to jump on the trend and take advantage of it.

Mocking the bull

An increase in demand and volatility in the derivatives market is likely to influence demand in the spot market.

A wave of bullish demand could result in a significant short-term advantage. The Bitcoin supply chain distribution metric on Santiment reveals that buying pressure has already started to build.

Source: Santiment

Bitcoin addresses with more than 10,000 coins have been accumulating since August 28. However, addresses holding between 100 and 10,000 BTC cut their balances over the last five days, thereby suppressing any potential upside.

Possible unforeseen risk?

Bitcoin might have started this week with relative uncertainty, but current observations underscore a bullish sentiment. The shift to positive funding rates and rising volumes in the derivatives market are healthy indicators supporting the likelihood of an upside.

Traders should be cautious, especially now that we are in a new month. September has historically been bearish at least seven times out of 10. If history repeats itself, then the market could be headed for a bull trap.


Sep 01, 2022

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