Bitcoin price is back at $50K, but exactly how 'bullish' are the bulls?

Bitcoin price is back at $50K, but exactly how 'bullish' are the bulls?


Cryptocurrency markets rallied 12.5% over the past seven days to reach a $2.44 trillion market capitalization. However, that move doesn’t seem to be inspiring confidence because the same level was tested 16 days ago when a 27% retrace followed ether’s (ETH) attempt to break $3,650 over the next six days. 

Regulation seems to be a key concerning factor for buyers as the U.S. House of Representatives is expected to vote on the $1 trillion infrastructure bill this month. In addition to defining who qualifies as a broker, the legislation would impose anti-money laundering (AML) and know-your-customer (KYC) type requirements on many kinds of cryptocurrency transactions, which could also be detrimental for DeFi protocols.

Top eight cryptos 7 and 30-day performances. Source: CoinMarketCap

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As shown above, the negative performance seen in the top-10 cryptocurrencies has impacted investor sentiment over the past 30 days. For this reason, it’s important to measure more than just Bitcoin’s nominal price. Traders should also analyze BTC’s derivatives indicators like the futures markets premium and options skew.

The futures premium shows traders are slightly bullish

The basis rate is also frequently referred to as the futures premium and it measures the difference between longer-term futures contracts and the current spot market levels.

A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango. This price difference is caused by sellers demanding more money to withhold settlement longer.

Bitcoin 3-month futures annualized basis. Source: Laevitas.ch

As depicted above, the current 9% annualized premium is neutral but shows an improvement over the previous couple of weeks. That indicates that traders are cautiously optimistic, leaving room for further long leverage when confidence is fully restored.

Options traders exit ‘fear’ mode

To exclude externalities specific to the futures instrument, one should also analyze options markets.

The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when “fear” is prevalent as the protective put options premium is higher than similar risk call options.

The opposite holds when market makers are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

Deribit BTC options 25% delta skew. Source: Laevitas

Notice how Bitcoin option traders entered the “fear” level on Sept. 25 as the $41,000 support was tested multiple times. Nevertheless, a drastic change took place since Sept. 30, and the indicator now sits at a neutral zone.

As the

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