The battle between crypto bulls and bears shows hope for the future
The blockchain space is seeing some areas of strength despite the perceived slowdown in the market. Bitcoin (BTC) and Ether (ETH) perpetual futures funding rates have turned back to positive on major exchanges, indicating bullish sentiment among derivatives traders. In addition, Bitcoin began trading below its cost basis, which has marked previous areas of market bottoms. In contrast, June saw decentralized finance (DeFi) experience a 33% decline in total value locked up, and crypto stocks return an average of -42.7% month-over-month.
There is an ongoing battle between bullish and bearish sentiments in different areas of the market. To help cryptocurrency traders maneuver through the battlefield, Cointelegraph Research recently launched its monthly “Investor Insights Report”. In the report, the research team breaks down the last month’s most important market moving events and the most critical data across the various sectors of the industry. The researchers provide expert analysis and insights that can benefit serious blockchain market participants.
Derivatives can provide a key indicator of changing sentiment
Until June, there had been a strong bearish mood in the market. An indicator of bearish and bullish sentiment is the volatility bias in a market. The larger the range of bias, the more volatile, while tighter ranges suggest less volatility – implying more confidence in the market. On June 18, the Bitcoin options 25-delta bias peaked at 36%, the highest ever. Since then, some optimism has returned, sending the bias down to 17%. This signals a strong belief that the crypto market will recover in the coming months.
Premiums on long calls on Bitcoin and Ether indicate that traders are optimistic about the end of the year. However, solvency problems and the risk of contagion are still present in the market and in the minds of investors and regulators.
In sideways markets, traders can use strangleholds to generate returns if Bitcoin remains ranged. Strangles involve selling puts and calls at different strike prices. The idea of a strangle is as the name suggests: placing a put (an option to sell) and a call (an option to buy) below and above the current spot price. For example, if Bitcoin is at $20,000, first sell a $15,000 put on the downside and a $30,000 call on the upside. If they expire after one month, the prizes result in the winnings minus the transaction fees.
Download and buy reports on Cointelegraph Research Terminal.
Currently, the option bias has a steep slope, with an implied volatility differential of up to 10% between the $17,000-$24,000 strike prices on Deribit and the Chicago Mercantile Exchange. This indicates a good setup for a risk reversal involving a short put at $17,000 and a long call at $24,000.
Is bullish sentiment starting to push bears back?
Bitcoin’s net unrealized loss has hit a three-year low, highlighting that its current market cap is nearly 17% below its overall cost basis. Historically, global bottoms have formed when losses reached over 25%. The downward moving averages and relative strength index in the oversold zone indicate that the bears are in control.
However, for the first time since March 2020, Bitcoin traded below the mining cost basis, a level that has historically marked global capitulations and bottoms in the price of Bitcoin. The net unrealized profit/loss indicator is more evidence that the bulls could potentially overtake the bears.
From derivatives to the NFT sector
The Investor Insights report covers various other topics such as security tokens, DeFi, blockchain gaming, cryptocurrency mining, blockchain-related stocks, regulation and venture capital investments. The subject matter experts stay up to date on all the latest news and trends to cut through the weeds and provide important insights into the blockchain industry.
Each section of the report covers important elements affecting the subject. Subject matter experts cover the most important events that will have a significant impact, and the information is presented in a digestible format that serious players in the crypto marketplace can use to get an overview, highlights and a forecast of what may be on the horizon. The newsletter is now available for subscription and contains complete charts and detailed analysis.
The Cointelegraph Research team
Cointelegraph’s research department consists of some of the best talent in the blockchain industry. Bringing together academic rigor and filtered through practical, hard-won experience, the researchers on the team are committed to bringing the most accurate, insightful content available on the market.
Demelza Hays, Ph.D., is the Director of Research at Cointelegraph. Hays has assembled a team of subject matter experts from all areas of finance, economics and technology to bring to market the premier source of industry reports and insightful analysis. The team uses APIs from a variety of sources to provide accurate, useful information and analysis.
With decades of combined experience in traditional finance, business, engineering, technology and research, the Cointelegraph Research team is perfectly positioned to put their combined talents to good use with the Investor Insights report.
Disclaimer: The opinions expressed in the article are for general information purposes only and are not intended to provide specific advice or recommendations for an individual or about any specific security or investment product.
