One hundred and eleven days have passed since Bitcoin (BTC) closed above $25,000, leaving some investors with less confidence that the asset has found a certain bottom. For now, global financial markets remain turbulent due to heightened tensions in Ukraine after this week’s Nord Stream gas pipeline accident.
The BoE’s emergency intervention in the government bond markets on September 28th also highlighted how vulnerable fund managers and financial institutions are now. The move represents a sharp departure from previous intentions to tighten the economy as inflationary pressures mount.
The S&P 500 has now entered its third consecutive negative quarter, for the first time since 2009. In addition, analysts at Bank of America lowered Apple’s rating to neutral due to the tech giant’s decision to cut iPhone production due to “weak consumer demand.” . Finally, according to Fortune, the real estate market showed the first signs of recovery after housing prices fell in 77% of urban America.
Let’s take a look at the bitcoin derivatives data to see if the deteriorating global economy is affecting crypto investors.
Protesters were not enthusiastic about the rise to $20,000.
Quarterly futures contracts are generally avoided by retail traders due to price differences with the spot markets, but it is the preferred tool for professional traders because it prevents the swings in funding rates that often occur in perpetual futures.
Annual premium on 3-month Bitcoin futures contracts. Source: Laevitas
The annual premium for the 3-month futures contract, as shown in the chart above, should trade between +4% and +8% in healthy markets to cover the costs and associated risks. The chart above shows that derivatives traders have been neutral or bearish for the past 30 days while the premium for Bitcoin futures has remained below 2%.
More importantly, the scale did not improve after BTC surged 21% between September 7-13, corresponding to the failure of the $20,000 resistance test on September 27. The data mainly reflects the reluctance of professional traders to increase their long (bullish) positions with leverage.
It is also necessary to analyze the Bitcoin options markets in order to rule out the externalities of the futures instrument. For example, a delta offset of 25% is a clear indication that market makers and arbitrage tables are overpriced to protect against an upward or downward movement.
In bear markets, options investors are betting on higher odds that prices will fall, causing the bias indicator to rise above 12%. On the other hand, bull markets tend to push the bias indicator below negative 12%, which means bearish positions are discounted.
Bitcoin 30 Day Options 25% Delta Bias Source: Laevitas
The shift in the 30-day delta has been above the 12% threshold since September 21, indicating that options traders are unlikely to offer downside protection. In comparison, the risks associated with it were more or less balanced between September 10 and September 13, with options to call (buy) and put (sell) in neutral sentiment.
The small number of futures liquidations assures that there are no surprises for traders.
Futures and options accounts show 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 liquidated. A similar price crash on September 19 led to the liquidation of leveraged futures contracts totaling $97 million.
On the other hand, there is a positive attitude, as according to derivatives calculations, the 111-day bear market was not enough to instill a bearish sentiment in Bitcoin investors. However, the bears still have untapped firepower, given that the futures premium is close to zero. If the traders are confident that the price will go down, the indicator will reverse.