It has been one hundred and eleven days since Bitcoin (BTC) closed above $25,000, which has left some investors unsure that the asset has found a confirmed bottom. At the moment, global financial markets remain unstable due to the heightened tension in Ukraine after this week’s Nord Stream gas pipeline accident.
The Bank of England’s emergency intervention in government bond markets on September 28 also sheds some light on how fragile fund managers and financial institutions are at the moment. The move represents a stark departure from the previous intention to tighten economies as inflationary pressures mounted.
Currently, the S&P 500 is in full swing for a negative third quarter in a row, the first since 2009. In addition, Bank of America analysts lowered Apple’s rating to neutral, due to the tech giant’s decision to scale back iPhone production due to “weak consumer demand.” “. Finally, according to Fortune, the real estate market showed its first signs of rebounding after home prices fell in 77% of US metropolitan areas.
Let’s take a look at Bitcoin derivatives data to understand whether the deteriorating global economy is having any impact on crypto investors.
Professional Traders Were Not Excited For A Rally To $20,000
Retail traders usually avoid quarterly futures contracts due to the price difference from the spot markets, but they are preferred tools for professional traders because they prevent the fluctuation of funding rates that often occur in perpetual futures.
The annual premium on Bitcoin futures for 3 months. Source: Laevitas
The annual premium for the three-month futures contract, as shown in the chart above, should trade at +4% to +8% in healthy markets to cover the costs and associated risks. The chart above shows that derivatives traders have been neutral to the downside for the past 30 days while the premium for Bitcoin futures has remained below 2% throughout.
More importantly, the scale did not improve after BTC surged 21% between September 7 and 13, similar to the failed test of $20,000 resistance on September 27. The data mainly reflects the unwillingness of professional traders to add long (bull) positions.
One should also analyze the Bitcoin options markets to rule out the externalities of the futures instrument. For example, a delta skew of 25% is a milestone when market makers and arbitrage desks raise their fees to protect against an upside or downside trend.
In bear markets, options investors give higher odds of a price plunge, causing the Skew Index to rise above 12%. On the other hand, bullish markets tend to push the skew indicator below negative 12%, which means bearish sell options are discounted.
Bitcoin 30-day options 25% delta skew: Source: Laevitas
The 30-day delta skew has been above the 12% threshold since September 21, indicating that options traders were less inclined to offer protection from the downside. By way of comparison, between September 10 and 13, the associated risks were more or less balanced, judging by the options to buy (to go) and to put (to put), indicating a neutral sentiment.
The small number of futures liquidations ensures that traders are not surprised
Futures and options metrics suggest that the bitcoin price crash on September 27 was more than expected. This explains the low impact on filtering. Despite a 9.2% correction from $20,300 to $18,500, only $22 million of futures contracts were forcibly liquidated. A similar price crash on September 19 totaling $97 million triggered liquidations in leveraged futures contracts.
On the one hand, there is a positive attitude because the 111-day bear market was not enough to instill a bearish trend in bitcoin investors, according to derivatives metrics. However, the bears still have unused firepower, considering that the premium for futures stands near zero. If traders were confident of a price drop, the index would have lags behind.
