A descending triangle pattern has been putting pressure on bitcoin (BTC) for the past three weeks, and while some traders consider this a bullish reversal pattern, the $19,000 support remains a crucial level to determine. the fate of the bulls.
Despite the apparent lack of a clear price floor, bitcoin derivatives metrics have improved significantly since June 30, and positive news from global asset manager VanEck may have eased trader sentiment.
On July 5, two pension funds in the US state of Virginia announced a $35 million commitment to VanEck’s cryptocurrency-focused investment fund.
On the same day, a subsidiary of the stock Exchange Huobi received its Money Services Business (MSB) license from the US Financial Crimes Enforcement Network (FinCEN). The Seychelles-based company said the license creates a foundation for expanding cryptocurrency-related business in the United States.
On July 7, positive news fell: decentralized finance staking and lending platform Celsius Network announced that it had fully repaid its Maker Protocol (MKR) debt.
Celsius is among several crypto yield platforms on the brink of insolvency after historic losses across multiple positions. Forced selling on leveraged positions by exchanges and decentralized finance (DeFi) apps has accelerated the recent crash in cryptocurrency prices.
Currently, traders are facing mixed feelings between the possible impacts of the contagion and their optimism that the support at $19,000 is strengthening. This is why analyzing derivatives data is key to understanding whether investors are pricing the likelihood of a bullish market decline.
Bitcoin futures premium turns slightly positive
Retail traders generally avoid quarterly futures because of their fixed settlement date and price difference from spot markets. See the article: Warner Music Group partners with Splinterlands and enables artists to create cryptocurrency games.. However, the biggest advantage of these contracts is the lack of fluctuation in the funding rate, hence the prevalence of arbitration offices and professional traders.
These fixed-month contracts tend to trade at a slight premium to spot markets, as sellers demand more money to hold settlement longer. This situation is technically known as “contango” and is not exclusive to crypto markets. Thus, futures should trade at a 5-10% annualized premium in healthy markets.
The annualized bitcoin futures premium turned negative on June 28, indicating weak demand from leveraged buyers. Still, the bearish pattern did not hold for long, as the indicator moved into the positive zone on July 4th.
Options traders remain skeptical of every price pump.
To rule out externalities specific to the Bitcoin Futures instrument, traders should also analyze options markets. See the article: TerraUSD (UST) Joins Nexo Exchange and Offers Double Yield Rewards. For example, the 25% delta asymmetry shows that arbitrage firms overcharge protection up or down.
Option traders give more chances for price to rise during bull markets, causing the skew indicator to fall below -12%. At the same time, the general feeling of fear of a market induces a positive skew of 12% or more.
June 18 marked the highest level of 30-day delta skew on record, which is typical of extremely bearish markets. Nonetheless, the current level of 16% skew shows investors’ reluctance to provide downside protection, which is reflected in the overload of put options.
Contagion remains a threat that adds pressure to the market.
It’s hard to say if $17,580 was the lowest level of the cycle, but some traders attribute the move to Three Arrows Capital’s inability to meet its margin calls. Read also: Refine Defi with Logarithmic Finance (LOG), Fantom (FTM) and Ripple (XRP). Don’t miss the incredible climb.
Some traders are calling for a “generational bottom,” but there is still a long way to go before investors swing higher as bitcoin remains locked in a descending triangle formation.
3AC was liquidated at the low of the generation, super cycle everything in a hurry.
On the one hand, bitcoin derivatives metrics show a modest improvement since June 30. On the other hand, investors remain wary of further contagion from such a prominent venture capital and crypto asset manager.
Sometimes the best strategy is to wait for a clearer market structure and avoid leverage at all costs, even if you are certain that you have reached the bottom of the cycle.
Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.