Bitcoin’s plunge below $16,000 was something most of the crypto-currency market didn’t expect just a week ago. However, the reaction from traders and investors has not been as bad as one might think. According to on-chain data and market data The crypto players are waiting for what will happen with Bitcoin, without looking at what happened yesterday.
Almost immediately after the plunge below $16,000, the market saw a surge in open interest on derivatives trading platforms, which translated into an exponentially growing number of long orders.
😖 Traders are viewing #Bitcoins 2-year low price levels as a #buythedip opportunity. Funding rates show an extreme #long bias, particularly on @FTX_Official, where many believe their funds may be impossible to withdraw. Feelings of hopelessness often correlate with higher risk. pic.twitter.com/OW2buYx2gb
– Santiment (@santimentfeed) November 9, 2022
The most interesting part of this trend is the behavior of investors, who have their funds locked up on the FTX exchange. The majority of traders who cannot withdraw their funds from the exchange develop an extremely high risk tolerance, betting almost 100% of their portfolios on the growth of the first crypto-currency, despite the most recent price action.
Unfortunately, the reasoning behind their decision is purely psychological as the majority of users believe that their funds will be impossible to withdraw, and the feeling of desperation is a driver for making unusual financial decisions.
However, it is too early to say that the crypto-currency market crash caused by the FTX and FTT situation is over. The insolvency of one of the world’s largest crypto-currency exchanges creates a huge risk for a number of entities in the market, including funds like Galaxy Digital, Sequoia Capital and DAOs like TrueFi.
In a matter of hours, millions of SOL crypto-currencies will be released from staking, potentially causing a market catastrophe that will fuel a further plunge in bitcoin and the market as a whole.