Bitcoin derivatives data suggests a BTC price pump above $18K won’t be easy


Traders may rejoice now that Bitcoin price has ventured above $17,400, but it’s been a long 27 days since Bitcoin (BTC) last broke the $17,250 resistance.

On Dec 13, after a two-week sideways move, Bitcoin posted a 6.5% rally towards $18,000 and while the current move still lacks strength, traders believe a retest of Bitcoin resistance is possible. $18,250.

Bitcoin 12-hour price index, USD. Source: TradingView

To kick off the week, the S&P 500 index rose to its highest level in 26 days on January 9. Weak economic data had previously fueled investor expectations of slower interest rate hikes from the US Federal Reserve and the January 12 Consumer Price Index (CPI) could lend some credibility. to this expectation.

On January 6, German retail sales data showed a year-on-year contraction of 5.9% in November. In the US, economic activity in the service sector contracted in December after 30 consecutive months of growth. The services purchasing managers’ index (PMI) reading was 49.6%, with readings below 50% generally pointing to a weakening economy.

Investors eagerly await the release of the Consumer Price Index (CPI) on January 12, which is more likely to dictate whether the Fed will raise interest rates by 25 basis points or 50 basis points in early February. Economists expect the report to show inflation rose 6.6% in the 12 months to December, so a weaker-than-consensus CPI could further boost market performance.

Still, the impacts of a year-long bear market continue to play out as a digital asset manager. Osprey Funds reportedly fired most of its staff through the second half of 2022. The investment company offers crypto products for the brokerage accounts of its accredited investors, including a trust.

Analysts should focus on Bitcoin derivatives to understand if the recent positive price action has finally turned crypto investor sentiment positive.

Futures premium shows sentiment slowly improving

Retail traders often avoid quarterly futures because of the difference in prices from the spot markets. Meanwhile, professional traders prefer these instruments because they avoid fluctuating funding rates on a perpetual futures contract.

Two-month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. Therefore, when futures trade below said range, it shows a lack of confidence from leveraged buyers, which is generally a bearish indicator.

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2-month Bitcoin futures annualized premium. Source: Laevitas.ch

The chart above shows positive momentum for the Bitcoin futures premium, which has recovered from a 3% discount on Dec. 30 to the current positive 1%. Although it is still in the neutral to bearish area, it represents less bearishness compared to December 13, before Bitcoin price surged to $18,000. However, the demand for long leverage positions at $17,000 is timid by the metric.

Before jumping to conclusions, traders should also analyze Bitcoin options markets to exclude the specific externalities of the futures instrument.

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Options price similar upside and downside risks

The 25% delta bias is a telltale sign when market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, option investors give higher odds of a price dump, driving the bias indicator to rise above 10%. On the other hand, bullish markets tend to drive the bias indicator below -10%, which means bearish put options are discounted.

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60-day Bitcoin options 25% delta bias: Source: Laevitas.ch

The delta bias bottomed out at 8% on Jan. 9, indicating that options traders are pricing in similar upside and downside risks. More importantly, the current level is the lowest since November 8, or since FTX exchange implosion.

Even if there is no appetite for leveraged longs using Bitcoin futures, whales and market makers are getting more comfortable with $17,000 as support.

Although there is no evidence that a rally to $18,250 is in the works, at least traders are less risk averse, according to derivatives data.

The views, thoughts and opinions expressed here are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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