Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

What happened when Alameda Research chose to go long on Bitcoin?

Note: The original author is Sam Trabucco, Head of Trading at Alameda Research.

A popular phrase in the market right now: What happened when this price trend chart went bad?

This is a post about how to distinguish between tranquility and storms.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

There have been several popular claims recently.

China FUD is depressing prices, then the US might follow?

Bitcoin is bad for the environment, or at least Musk thinks so.

Maybe with this drop, some institutions with crypto asset allocations will get into trouble and then need to sell? (e.g. Saylor, etc.)

However, none of this is realistic and people oscillate between exaggerating the news they want to hear and underestimating the news they don’t want to hear. So let’s break it down a bit and see what is actual.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

I’m going to start by saying something that sounds stupid, but hear me out. The price chart below is for a 2 week period, but it can actually be divided into four different parts as follows.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

Things like this are why I make big money.

No, obviously I’m being a bit tongue-in-cheek, but it’s worth highlighting that the price of Bitcoin has been going strong in the beginning days of the timeframe. Why?

I think different types of news have dominated the price action in each period.

June 9-11: Salvador’s news release pushed up BTC’s price / Musk’s influence was muted

June 11 – 13: China/US FUD/Quote reversal

June 13 – 15: Saylor buying or other reasons/quote reversal

June 15 – 23: China FUD / “Is Saylor done?” / Market Reversal

I think each of these factors constitutes an overreaction – that’s why I use “reversal” as an effect of all these factors, because I think none of these factors may have an effect on BTC’s “value. value”, or that people should price it in the medium term.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

Can you tell me where El Salvador is on the map?

The Chinese FUD is new this time, but China has always had FUD and we know China will do something about it.

Warren (note: Republican U.S. Rep.) is a long way from regulating crypto assets.

Saylor isn’t finished either.

This happens all the time – remember when Musk tweeted and BTC spiked 10% and then dropped 9% in a few hours?

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

So here’s what really happens: people overreact to the news, the liquidation exacerbates that overreaction, and when people realize it (when another news story tells them), they trade the other way.

It’s the same old story!

The week-long crash we just witnessed (below $30,000 earlier today) is worth highlighting in particular because there is some strange behavior going on here.

Specifically, let’s take a look at the BTC perpetual contract, and here’s the average funding rate for Coinan

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

The BTC perpetual contract in Coin is usually very important, and as we have seen, a lot of money is being paid out during this time that we don’t normally see as “long”, and during this time OI is “shrinking”, not “all”. all” from liquidation.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

This suggests that longs are closing out their positions one way or another — yes, some are being liquidated, but some are simply choosing to close out their positions.

The situation is similar with FTX – as OI NAV plummeted, more funding -> longs , Bybit, OKEx and all the other important perpetual contract exchanges have similar patterns that suggest the same thing – -people have chosen to close their positions for whatever reason and are actively selling.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

Also, yesterday/today’s net liquidation was the highest of the last few days – as we discussed, the surge in liquidation tends to help fuel reversals because no one wants to sell to $30,000, really. As usual, buying in this position is a predictably good trade.

Alameda Research: Bitcoin Market Overreacts, Has Chosen to Go Long

In fact, trading at the end of any of these periods is predictably good – the goal is to find it.

It seems that today marks yet another paradigm shift? We’ll just have to wait and see – and Alameda’s new long position will hopefully do the same.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/alameda-research-bitcoin-market-overreacts-has-chosen-to-go-long/
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