Bitcoin traders expect a “generational bottom”, but BTC derivative data disagree
A declining triangle pattern has been pushing Bitcoin (BTC) for the past three weeks, and while some traders cite this as a bullish reversal pattern, $ 19,000 support is still a crucial level in determining the bull’s fate.
Despite the apparent lack of a clear price base, Bitcoin derivative calculations have improved significantly since June 30, and positive news from global asset manager VanEck may have eased traders’ sentiment.
On July 5, two pension funds in the US state of Virginia announced a $ 35 million commitment to VanEck’s cryptocurrency-focused investment fund.
On the same day, a Huobi exchange subsidiary received the Financial Services (MSB) license from the United States Financial Crimes Enforcement Network (FinCEN). The Seychelles-based company stated that the license creates a basis for expanding crypto-related business in the United States.
Some positive news came out on July 7, when Celsius Network announced that the decentralized financial investment and lending platform had repaid its outstanding debt to the Maker (MKR) protocol.
Celsius is among several crypto-return platforms on the verge of insolvency after historical losses across several positions. Forced sales of leveraged positions from stock exchanges and decentralized financial applications (DeFi) accelerated the recent crash in cryptocurrency.
Traders are currently facing mixed feelings between possible contagion effects and their optimism that support of $ 19,000 will increase in strength. For this reason, it is important to analyze derivative data to understand whether investors are pricing higher odds of a market downturn.
Bitcoin futures premium turns a little positive
Retailers usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. The main advantage of the contracts, however, is the lack of a fluctuating financing rate; hence the prevalence of arbitration boards and professional traders.
These fixed-term contracts tend to trade with a small premium to the spot markets as sellers ask for more money to hold back settlements longer. This situation is technically known as “contango” and is not exclusive to crypto markets. Therefore, futures should be traded at a 5% to 10% annual premium in healthy markets.
Bitcoin annualized futures’ premiums went negative on June 28, indicating low demand from leverage buyers. Nevertheless, the bearish structure did not last long when the indicator shifted to the positive area on 4 July.
Related: Genesis Trading CEO confirms 3AC exposure, parent company helps close losses
Option traders remain skeptical of each price pump
To exclude externalities specific to the Bitcoin futures instrument, traders must also analyze the options markets. For example, 25% shows delta skew when arbitrage desks charge for top or bottom protection.
Option traders offer higher odds of a price increase below bullish markets, causing the skew indicator to fall below -12%. Meanwhile, a market’s generalized fear induces a positive bias of 12% or higher.
June 18 marked the highest record ever 30-day delta bias, typical of extremely bearish markets. Nevertheless, the current level of skew of 16% shows investors’ reluctance to provide downside protection, a fact that is reflected in the overpricing of put options.
Infection is still a threat that puts pressure on the entire market
It’s hard to say whether $ 17,580 was a low cycle, but some traders attribute the move to Three Arrows Capital’s inability to meet margin requirements.
Some traders are calling for a “generational bottom”, but there is still a long way to go before investors turn bullish as Bitcoin remains locked in a declining triangle formation.
3AC was discontinued at the generation base, send everything into super cycle with speed
– hentaiavenger66 (@ hentaiavenger66) July 6, 2022
On the one hand, Bitcoin derivative calculations show modest improvement since June 30. On the other hand, investors are still suspicious of further contagion from such an important venture capital and crypto asset manager.
Sometimes the best trade is to wait for a clearer market structure and avoid influence at all costs, regardless of your certainty of a cycle bottom.
The views and opinions expressed here are solely those of author and does not necessarily reflect the views of the Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.
