Bitcoin Coins (BTC) plummeted 26% from a high of $ 58,300 on February 20 resulted in some deterioration in the market, but from a technical point of view, it was purely psychological, as the digital asset easily supported up to $ 43,000. Because of this defect, indices like the Crypto Fear & Greed Index hit 38, their lowest level in five months.
While the $ 15,400 contraction may seem extraordinary, 25% and even larger corrections occurred on six different occasions during the 2017 bull run. What’s more, when BTC first hit its all-time high of $ 42,000 on January 8th. Over the next two weeks, there was a negative turnover of 31.5% to $ 28,750.
When Bitcoin attempted to set a bottom, derivatives canceled some bullish signals and immediately showed alarming data. For example, the open interest rate on futures contracts fell 22% after peaking at $ 19.1 billion on February 21.
As shown above, due to the end-of-month maturity, open interest rates on BTC have decreased by 22%. Despite its importance, the remaining $ 14.9 billion is still 44% higher than last month’s data.
Derivative indices remained stable, which indicates the stability of the market.
By measuring the contract premium to the current spot level, it can be inferred whether professional traders are leaning in an upward or downward direction. In general, markets should post a slightly positive annual interest rate, a condition known as contango.
Although the monthly premium for futures declined from the extremely bullish 6% seen in mid-February, it managed to hold above 1.2%. The annual equivalent is 70%, up from the current 17%. Thus, the futures premium indicates that excessive buying influence has been eliminated, but we are not approaching a bear market.
Meanwhile, the 25% delta deviation of the BTC options shows how neutral bullish calls are priced in comparison to their respective bearish bears.
The indicator acts like fear and greed for the options trader, and is set at -5% until Feb 21, which means protecting against an uptrend was more expensive. Over the past week, 25% of the delta shift has moved into neutral territory, last seen nearly five months ago.
It also confirms the lack of despair on the part of market makers and leading traders, while signs of over-optimism seen in January have faded.
No downtrend during a crash is a good sign
As institutional investors continue to plunge into space, Bitcoin’s volatility tends to have less of an impact on derivatives markets. To illustrate this new situation, the BTC futures and options markets were far from any red signals despite a 26% price drop.
The influx of positive news from bitcoin and institutional investor interest probably won’t be affected by the recent $ 43,000 retest. When companies and mutual funds merge bitcoins, these actions should be interpreted as buying opportunities, and not seen as catastrophic.