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Adam Cochran: What indicators to watch for to determine if the bottom of Bitcoin has not yet been reached?

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Adam Cochran: What indicators to watch for to determine if the bottom of Bitcoin has not yet been reached?

Venture capital partner Adam Cochran has analyzed the recent trends in Bitcoin, including the indicators he observed, the current market situation, and his expectations for future trends. While he emphasizes that this is not financial advice, this detailed explanation is worth bookmarking for everyone to reference and develop their own trading and analysis methods.

Observations by Adam Cochran

Aggregated Open Interest

The Aggregated Open Interest of Bitcoin futures contracts has recently decreased, down 17% from its recent high, but still 20% higher than the average seen within a more stable range.

Interestingly, it has been forcefully pushed up each time it drops, indicating that people are attempting to catch the falling knife repeatedly. Given this, we may want to understand who our buyers are and what their expectations are.

Currently, OI from less complex and higher leveraged buyers, typically from Binance and ByBit, has increased, while OI from more complex and lower leveraged investors, typically from Deribit, has decreased.

BTC 3 month annualized basis

At first glance, the 3-month annualized basis seems to be in a good position, but in reality, the price is still far above the average level, indicating that there are still many suppressed expectations here.

Cochran's Speculation on the Current Market Situation

Cochran speculates on the current market situation:

  1. Many retail investors are selling on the ETF and halving stories, hoping it's just a pullback. They continue to buy on dips using leverage.
  2. In theory, the market may bottom out and change direction in the short term, but we need an actual spot buying catalyst to meet the expensive expectations on the table.
  3. Most mature investors are not yet convinced of the direction or are waiting to enter. The current funding rates do not show bearish sentiment, even in options, indicating they expect the bottom to start forming soon but it's not fully formed yet.

Bottom Indicators Observed by Cochran

Cochran believes the ideal bottom signal should have the following conditions:

  • Reset of funding and sentiment
  • Another 25% drop in 3-month annualized basis
  • Another 15% drop in OI

However, this is not immediate, and the trading market is not binary; it goes through many levels of changes. For example, small declines may be added to the permanent stack, and bearish corrections are necessary for a healthier future.

Bitcoin Trend Forecast by Cochran

Cochran suggests:

  • The range of 35K~37K is more suitable for long-term buying of spot
  • If the bottom indicators reset faster, the range may move up to 37K~38K
  • If 28K~32K arrives, confident players can deploy with leverage
  • If the above bottom indicators appear, larger leveraged operations or buying large amounts of spot can be made

Not Financial Advice, Please DYOR

This analysis by Cochran was written against the backdrop of ETH 2200/BTC 39.9k. He also reminds everyone that this is not financial advice as everyone's risk situation and financial needs are different. It is recommended to reference and develop trading and analysis methods that suit individual needs.