A closely followed crypto capitalist is issuing a warning that Bitcoin (BTC) and Ethereum (ETH) are on the verge of another massive sell-off event despite being down big from their all-time highs.
Former BitMEX CEO Arthur Hayes says that he’s keeping a close watch on on-chain data using decentralized finance (DeFi) analytics platform Parsec.
According to Hayes, on-chain data for Wrapped Bitcoin and Ethereum tell him that most of the liquidations from borrowers failing to meet their obligations have already taken place after this week’s crypto carnage.
With DeFi players posing little threat to the crypto ecosystem, Hayes says that he has his eye on options flows to uncover the line in the sand for dealers or market makers.
“Now let’s focus on the listed and unlisted options flows. Looking at Deribit exchange, most of the open interest is at $20,000 and $1,000 for BTC and ETH, respectively. We can also assume that there are massive over-the-counter structured products centered around those strikes as well.”
In options trading, the strike price is the price level at which the contract’s underlying assets, which in this case are BTC and ETH, may be sold. According to Hayes, the closer we get to $20,000 for BTC and $1,000 ETH, the more market makers have to sell their Bitcoin and Ethereum.
If these levels break, the crypto capitalist warns that the big players have no choice but to sell their BTC and ETH holdings in the spot markets.
“As far as the charts go, you better get out your Lord Satoshi prayer book, and hope the lord shows kindness on the soul of the crypto markets. Because if these levels break, you might as well shut down your computer bc your charts will be useless for a while…
If these levels break, $20,000 BTC and 1,000 ETH, we can expect massive sell pressure in the spot markets as dealers hedge themselves. We can also expect that there will be some over-the-counter dealers and that will be unable to hedge properly and might go belly up.“
At time of writing, Bitcoin is changing hands for $22,166 while Ethereum is valued at $1,221.
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