Unfortunately, the seven-day rally that took bitcoin to nearly $39,000 has come to an end. The price of the
Bitcoin’s daily price chart seems to be creating a steady recovery pattern, but there are some worrying indicators in the derivatives markets right now. Currently, the futures and options markets are showing a lack of confidence among professional bitcoin traders, but there is a positive shift in the data.
diagramuh bitcoin 1 day | Source: TradingView
The road to $40,000 seems difficult to predict and traders often call it “manipulation” when such price movements occur. Professional bitcoin trader maze said on January 28:
“If bitcoin is in this area, be careful. A picture says more than a thousand words and I think I say it all. It’s time to decide the success or failure of BTC. This weekend is the end of the week and the end of the month so expect volatility and manipulation.”
Regardless of the reason for the Bitcoin price rally, investors should analyze the derivatives markets to understand the positions of whales, market makers, and arbitrage desks.
While the instruments of choice for retail traders are perpetual contracts (reverse swaps), professional traders often opt for fixed-schedule futures and options. Although more complicated to trade, these derivatives offer a more comprehensive strategy.
liquidation has taken placebut can go on The way to $69k
The data shows no futures liquidation since Jan. 23. When leveraged longs (buyers) exit their positions, it accelerates the price correction as futures exchanges need to sell futures contracts at market prices.
Complete liquidation of crypto futures contracts (U.S. dollar) | Source: coin jar
The last time I was forced to exit a “huge” long position was on January 23rd at $290 million. This partly explains why Bitcoin’s rally over the past week has been relatively peaceful. However, the market is not out of danger considering that BTC is currently trading 44% below its all-time high of $69,000.
Annual Difference Fee belong 3 Month Bitcoin Futures Contract | Source: Laevitas.ch
Bitcoin futures annual spreads will range from 5% to 12% to compensate traders for “locking” funds for 2 to 3 months until the contract expires. Levels below 5% are extremely bearish, while above 12% indicate an uptrend.
Looking at the chart above, this index fell below 5% on January 21st and has not shown many signs of confidence from professional traders.
So the big question is: is trust coming back? For example, if Bitcoin breaks the $42,000 resistance, some traders will lower their vigilance, leading to more buying as no one wants to be left behind.
futures market Bitcoin neutral, but options traders still incredulous
It’s a bit difficult to determine the direction of the market right now, but a 25% delta divergence is an indication of when arbitrage desks and market makers are overcharging to protect the upside or turn down.
When traders fear the bitcoin price collapse, the divergence indicator will rise above 10%. On the other hand, the general enthusiasm is reflected in a deviation of -10%.
difference difference 25% of the contract q30-day bitcoin option | Source: Laevitas.ch
According to the chart, the deviation is close to 10% for almost a week, even though the BTC price has recovered by 18% since the $33,000 bottom. Options contract deviation data shows that professional traders are still betting on the market crashing.
Despite the not-so-positive bitcoin options indicator, arbitrageurs and market-makers will be forced to reverse their bearish positions once they surpass $42,000. However, considering that the futures premium is showing no sign of despair even as the market is down 52% from its all-time high, the data offers a constructive view.
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According to Cointelegraph