BTC Price Drops 3.5% as ‘Overheated’ Bitcoin Derivatives Spark Distress

Bitcoin (BTC) broke below $35,000 after Wall Street’s open on Nov. 2 as analytics warned of “overheated” derivatives.

Bitcoin Undoes Post-Fed Gains

Data from Cointelegraph Markets Pro and TradingView tracked a retreating BTC price, erasing ground it had recovered overnight.

The largest cryptocurrency hit new 18-month highs of $35,968 on Bitstamp before consolidating — a process that was gaining momentum at the time of writing.

The hikes followed encouraging language from Jerome Powell, chairman of the US Federal Reserve, who in a speech suggested that interest rate hikes could soon end.

The Fed chose not to change rates at the last meeting of the Federal Open Market Committee, or FOMC, on November 1.

“Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since the beginning of the year but remain strong, and the unemployment rate has remained low. Inflation remains high,” stated an accompanying press release.

“The US banking system is strong and resilient. Tighter financial and credit conditions for households and businesses will likely weigh on economic activity, hiring and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”

As Cointelegraph reported, $35,000 quickly became a key BTC price support level to maintain for market participants once reached. The area above $34,500, meanwhile, has been described as an “ideal” target for a local low.

Now, down more than $1,000 from its highs, Bitcoin was worrying some, with derivatives markets particularly in focus.

“All Bitcoin derivatives markets are overheated right now,” Charles Edwards, founder of digital asset and quantitative Bitcoin fund Capriole Investments, said. https://twitter.com/caprioleio/status/1719948421484994627/photo/1 on Twitter along with Capriole’s own data.

“This captures Perpetuals, Futures and Options. Stay safe out there….”

Reacting, popular trader Skew agreed, arguing that it is now the spot markets that are in charge of salvaging BTC price strength.

“Something to be aware of when sizing positions these days,” he https://twitter.com/52kskew/status/1720003482823053349 to Twitter subscribers.

“When derivatives heat up, it puts an increased focus on the spot market to support current prices and trends.”

Analysis warns of liquidity “rug pulls”

In its own analysis, monitoring resource Material Indicators also concluded that “caution” should be applied to the current Bitcoin trading environment.

Uploading a screenshot of BTC/USDT order book liquidity to the largest global exchange, Binance, warned that support levels could disappear quickly — a form of “rug pulling.”

Support for newcomers gaining liquidity at the time of writing was at both $34,000 and $33,500.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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