The price of bitcoin (BTC) eventually woke up and climbed to a new high in 2020, but as markets rally above $ 10,000, it seems that some traders have opened too long lists.
This effect became clearer when financing for standing contracts reached the second highest level this year of 12.4% per month.
Financing in itself should not be seen as a red mark, especially not for short periods. The problem is mainly with Kontango, also known as the futures base, which has been unusually high in the last two days. This indicates that professional traders enjoy a great advantage on the buying side.
Most of these centers are profitable as contango exceeded the annual rate by 10% before exceeding the $ 10,400 level. To confirm that this optimism is in a controllable situation, it is also necessary to evaluate the option markets and determine whether the 25% delta deviation shows signs of stress.
The BitMEX financing rate rises to a 12-month high
BitMEX is currently one of the three largest measured exchanges with open interest, and the exchange also provides clear reports on the financing rate.
Fixed contracts, also known as reverse swaps, require an 8-hour adjustment of the financing rate, and this will vary based on the number of long purchases and short leverage.
BitMEX has a financing rate of 0.13% lately, which means that buyers pay 12.4% a month to go long. This level is not unique, but over time it creates an uncomfortable situation for holders of long-term contracts.
CONTANGO is approaching dangerous levels
It is important to follow this metric as Contango measures the long-term futures premium to today's spot level. Professional traders tend to be more active than retailing these instruments as prices fluctuate more and have expiration dates.
These contracts usually trade for a small premium, which indicates that sellers are asking for more money to hold settlements over a longer period.
Futures are up 3 months on an annual basis, up 10% annually two days ago, and are currently at their highest level since early March. These high annual prices of 15% indicate that professional traders pay a large premium to the spot markets and thus benefit greatly from buyers.
No special levels will be unbearable for the owners, although a sideways market from here will make long-term buying positions more expensive.
The options markets show no signs of over-optimism
When markets enter a very confident scenario, the option markets tend to provide unusual data. The delta deviation of 25% shows how the more expensive market for bullish options is priced compared to similar put options.
Bitcoin options with 25% participating crime
Bitcoin options with 25% participating crime. Source: oblique
Delta deviation by 25%, the fear / greed index is currently 12% negative, which means that it is more expensive to protect against price increases.
Again, this is not an alarming level, in fact some would say that this is normal after such an impressive increase of $ 2000 in less than a week.
Crane bulls now look comfortable
Even exceeding the annual rate of 100% is not uncommon in derivatives markets, mainly because positions do not last long. However, no trader wants to have such an exploited position for more than two weeks in a sideways market.
Positions with high leverage may also indicate that traders expect it to close soon. Professional investors know that others are paying close attention to these calculations and using this information to their advantage. Others may disguise profits, leaving only profits as a margin, and this may also contribute to the current phenomenon of overcapacity.
Long-term owners now seem to be quite comfortable, because they are not in a hurry to end their positions. This may change if a retest is performed at the $ 10,400 level, but there are currently no signs of weakness in the derivatives markets.