China bans Bitcoin (BTC) again.
No, we are not traveling on time. On September 24, the People’s Bank of China (PBoC) released a new set of measures to strengthen coordination among departments in the fight against crypto activity. The measures are aimed at “disabling payment channels and removing linked websites and mobile applications in accordance with the law.”
Most investors may have missed the monthly expiration date for BTC and $ 1.5 billion of Ether (ETH), which happened less than an hour before the cryptocurrency ban news broke. According to Molly, a former contributor to Bitcoin Magazine, the notes from China were originally published on September 3.
However, if some divisions are looking to take advantage of negative price fluctuations, it makes sense to publish news before the 08:00 UTC deadline on Friday. For example, the $ 42,000 protective put was no longer useful because Deribit expired at $ 44,873. This option holder had the right to sell bitcoin for $ 42,000, but it has no value if the bitcoin expiration date exceeds that level.
For conspiracy theorists, the expiration of bitcoin futures on the Chicago Mercantile Exchange (CME) is the average price between 2pm and 3pm UTC. As a result, the potential open interest of US $ 340 million approached the level of US $ 42,150 million. In the futures markets, buyers (buying positions) and sellers (buying short) are constantly overlapping, so it is almost impossible to guess which side has the most firepower.
Bitcoin price on Bitstamp in USD. Source: TradingView
Despite a negative price volatility of $ 4,000, the total liquidation of the long-term futures contract was less than $ 120 million. This data should be of great concern to the bears because it indicates that the bulls are not arrogant and are not using excessive influence.
Professional traders showed some skepticism but remained neutral
To analyze how much professional traders are going up or down, you should track the futures premium, also known as the “base price”.
The index measures the difference between long-term futures contracts and the current level of the spot market. Expect 5% to 15% annual premiums in healthy markets – a situation known as contango.
This price gap occurs because sellers ask for more money to block settlement for a longer period, and when this indicator turns off or becomes negative, a red warning is displayed known as a “reversal”.
The base price of a 3-month bitcoin futures contract. Source: Laevitas.ch
Notice how the sharp drop, fueled by the 9% negative move on September 24, pushed the annual futures premiums to their lowest level in two months. The current 6% index is at the bottom of the “neutral” area and completes a moderately bullish period that lasted until September 19.
To confirm whether this movement is typical for a given instrument, it is also necessary to analyze the options markets.
Options Markets Confirms that traders are entering the “fear” zone.
A delta deviation of 25% compares similar call (buy) and put (put) options. The indicator turns positive when “fear” prevails, as the premium for calls is higher than for similar risk calls.
The opposite is obvious when market makers are bullish, which turns the 25% delta into negative territory. Readings between negative 8% and positive 8% are considered neutral.
Delta Deviation Deribit Options 25%. Source: laevitas.ch
A delta deviation of 25% has been in the neutral zone since July 24, but increased to 10% on September 22, indicating “concerns” for option traders. After briefly revising the neutral 8% level, the current bitcoin price movement has pushed the index above 11%. Again, the level that was last seen two months ago is very similar to the BTC futures market.
While there are no bearish signs in the bitcoin derivatives market, today’s fall below $ 41,000 is becoming a “fear” mode. As a result, futures traders are reluctant to go long, while options markets offer premiums for protective put options.
If Bitcoin doesn’t show strength this weekend, the bears could take advantage of the current investor panic.