Record-Breaking Bitcoin Rally Post-Trump Victory Begins To Cool In Derivatives Trading, What’s Next?

The massive Bitcoin (BTC) rally following Donald Trump’s victory in the US presidential election is beginning to show signs of slowing down, particularly in the derivatives market, as evidenced by the leading digital asset’s retreat below the $90,000 mark on Thursday. 

Bitcoin Experiences Significant Liquidation Activity

According to Bloomberg data, the premium for CME-listed Bitcoin futures contracts—commonly used by institutional investors to speculate on price movements—has decreased, indicating a potential shift in market sentiment.

K33 Research notes that the basis, or the difference between the futures price and the spot price, has dropped to around 10% after previously hovering between 13% and 16% since the election. 

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Vetle Lunde, head of research at K33, remarked, “Markets seem to be cooling down… that might have been a subtle hint of moderating risk profiles.” This shift suggests that investors may be reassessing their strategies in light of the recent price volatility.

Currently, Bitcoin is trading at $87,970, down from its all-time high of $93,462 reached just a day ago. Since Trump’s election victory, the cryptocurrency has seen an increase of over 30%. 

However, this rally has been accompanied by significant liquidation of leveraged bullish positions. In the past 24 hours, liquidations of long positions—those betting on price increases—totaled $447 million, compared to $207 million for bearish bets. 

Renewed Trader Interest

Profit-taking is also contributing to the recent downturn, particularly as Bitcoin approached the $90,000 mark, which has historically been a significant level for open interest in call options. 

James Davies, CEO of Crypto Valley Exchange, noted, “Crazy speculative days in the market, big profit taking in the last few hours… $90k is a massive level in the call options open interest.”

The rally has primarily been fueled by fresh demand in the spot market, evidenced by substantial inflows into exchange-traded funds (ETFs) backed by Bitcoin and relatively moderate leverage among traders. 

Interestingly, the funding rate for Bitcoin perpetual futures on offshore exchanges rose after falling earlier in the week, indicating renewed interest among traders after the so-called “Trump trade” catalyst.

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Options traders are increasingly optimistic, with growing interest in calls with strike prices at $110,000 and $120,000, according to data from Deribit. As Davies commented, “It’s all pure speculative trading right now, expect lots of volatility and a lack of clear signals for a while whilst we wait for policy announcements in the U.S.”

As the market approaches the expiry of November options, all eyes will be on whether the $90,000 price point will serve as a resistance level or if Bitcoin can surpass it once again.

Featured image from DALL-E, chart from TradingView.com