The price of Bitcoin may have exceeded $20,000, but the 40% reduction in volume shows that bears are watching BTC closely.

Today, the price of Bitcoin (BTC) has reached an all-time high of $20,000 and in the process a record $7.9 billion in open futures contracts has been set.

Although the price has risen 74% in the last two months, the total accumulated settlement of short sellers was $4.3 billion, less than the $4.8 billion of long positions.

As shown in the graph above, aggregate open futures contracts have increased 90% in the last two months. Thus, it signals that investors are increasing their positions, which in turn allows even larger players to participate.

It is also important to note that the Chicago Mercantile Exchange (CME) already holds more than $1.3 billion of these contracts, undeniable evidence of the growing institutional participation in BTC markets.

By looking at daily settlements, investors can better assess how traders have used leverage. Unexpected price swings tend to cause higher settlements than current trends, such as the recent flight of Bitcoin to $20,800.

Note that the largest candle represents buy positions being forcibly closed on November 26th, with the price of the BTC falling 14.4% in 12 hours. Today’s breach of the $20,000 resistance caused short positions to settle for $365 million, but this is still no match for the previous month’s bearish move of $902 million.

Volume failed to keep up with the new BTC price hike

The recent downward trend in volume is another reason for bears to celebrate. The total unadjusted Bitcoin trading volume has decreased 40% in the last three weeks.

The average daily trading volume of Bitcoin Bank spot on exchanges reached $45 billion at the end of November and has since dropped to $25 billion. Although there is a possibility that the exchanges have inflated their volumes, there may also be some bearish maneuvers in play.

However, a similar drop of 40% occurred in the BTC/USD and BTC/USDT Binance markets of Coinbase. Therefore, bears can expect such volume weakness to indicate a lack of confidence in $20,000 becoming a support level.

Perpetual Futures Reflect Excessive Leverage

Perpetual contracts, also known as reverse swaps, have a built-in fee usually charged every eight hours. Even if the open positions of buyers and sellers are matched at all times, their leverage can vary.

When buyers (long) are the ones requiring the most leverage, the financing rate becomes positive. Therefore, it is the buyers who pay the fees.

Sustained financing rates above 4% per week translate into extreme optimism. This level is acceptable during market highs, but problematic if the BTC price is on the side. A high financing cost can force buyers to reduce their positions, thus increasing selling pressure.

In situations like these, the high leverage of buyers increases due to the increased risk of large settlements occurring with unexpected price declines.

Thus, bears may be holding their cards close to their chest, waiting for the best moment to test the market.

It is possible that this happens closer to the expiration of futures and options on December 25 or during weekends, when the order books are usually narrower.

Could the important returns provided by Bitcoin dwarf those obtained in business?

We have just broken our historical record, after three years of patience, and of course, today everything looks rosy. We are talking about percentages, returns and profits. Everyone is very happy. And it’s logical. The investment is paying off. That is, everyone is in a positive mood, regardless of the purchase price. Fortunately, not all of us are buying in December 2017. Most bought at much lower prices and today we are enjoying increases of 2X, 3X or more. However, many entrepreneurs are still skeptical. Is investing in Bitcoin better than a good deal?

I should warn you in advance that the thoughts expressed here are more personal opinions than an in-depth analysis based on pure data. They are personal and subjective reflections. The reader must decide how useful what is said here can be. Because mine are constructed from anecdotes coming mainly from a very limited context. That is, from my day-to-day life. The fact that I lead a double life suddenly gives me the benefit of seeing the contrasts of the two visions. When I say that I lead a double life, I don’t mean that I go out at night to fight crime with a mask. I mean that I invest in Bitcoin and write a lot about it, but also that I have my business. So, I’m a bitcoiner and an entrepreneur.

Reasons to get on the bus: Why buy Bitcoin?

This is quite relevant, because the point is that we’re talking about two very different circles. The average bitcoiner is very different from the traditional (Latin American) entrepreneur. I’m talking about demographics, way of thinking, and the general view of things. For example, among bitcoiners, I could be labeled conservative, old, and somewhat prosecutory. But, among business people, I could be labeled young, avant-garde, and out of the ordinary. „The one who knows about Bitcoin. (I live in Venezuela).

Many bitcoiners seem to be halfway pissed off at the world. And they easily fall for the rhetoric of conspiracies. That is, the evil system. They don’t have much experience, but they are always „right“. And they are very given to controversy. That is, they are easily upset during a debate. They love to fight on Twitter with strangers and things like that. And, above all, Bitcoin is the best thing in the world. The messiah who will bring us out of the abyss.

The entrepreneur usually has years in his trade. He knows a lot of people in his field. He has partners, contacts, and acquaintances. Maybe he knows people in the government. And he has a nose for business. The Latin American businessman generally trusts the dollar and the U.S. Government. He invests in houses, cars, and his business. He has accounts abroad. And he invests in Miami, Panama, or somewhere like that. Real estate, generally. But, above all, he is a social rather than a technical being. Which means he’s basically a gregarious animal. He’s not on Twitter. He doesn’t argue on the networks. Meetings are not virtual. They are face-to-face. The dinner, the bar, the lunch. The mountain bike trip. You sell things, you buy things, you make loans, and you make deals.

One of the big differences between doing business in Latin America and doing business in the United States or Europe is the issue of margins. In Latin America, a margin of 30%, 50%, 100% or more on a business is not particularly rare. In my industry (vehicles), margins are quite high. Not as high as margins in the food business. But they’re certainly much higher than what we’ve seen in the United States. In Venezuela, for example, you can be a dealer and do business. But, in the United States, the competition is simply brutal. The pressure from the big guys is devastating for the little guys. This obviously reduces profit margins.