Bitcoin's $29K is closer than you might expect, according to derivatives data

Bitcoin’s $29K is closer than you might expect, according to derivatives data – Mail Bonus


Bitcoin (BTC) price continues to struggle with the $24,000 resistance and the price was rejected there on August 10, but the rejection was not enough to knock the price out of the 52-day long rising channel. The channel has $22,500 support and this bullish formation suggests that the BTC price will eventually reach the $29,000 level in early October.

Bitcoin/USD 12 hour price. Source: TradingView

Data on Bitcoin derivatives show a lack of interest from leveraged loans (bulls), but at the same time they do not price in a higher probability of an unexpected crash. Interestingly, the most recent Bitcoin downturn on August 9 was followed by a negative performance from US stocks.

On August 8, chip and graphics card maker Nvidia Corp ( NVDA ) announced that its second-quarter sales would fall 19% compared to the previous quarter. Furthermore, the US Senate passed a bill on August 6 that could have a negative impact on business performance. Despite freeing up $430 billion for “climate, health care and tax” funding, the provision would impose a 1% tax on public company stock purchases.

The high correlation of traditional assets with cryptocurrencies remains a major concern for some investors. Investors should not get ahead of themselves even if inflationary pressures ease because the US Federal Reserve is watching employment data very closely. The latest reading showed unemployment at 3.5%, typical of overheated markets, forcing the monetary authority to continue raising interest rates and withdraw debt-buying plans.

Reducing risk positions should be the norm until investors clearly signal that the US Federal Reserve is closer to easing its tightening monetary policy. That is exactly why crypto traders follow macroeconomic numbers so closely.

Currently, Bitcoin lacks the strength to break the $24,000 resistance, but traders should study derivatives to gauge the sentiment of institutional investors.

The metrics for bitcoin derivatives are neutral to bearish

The annual premium of Bitcoin futures measures the difference between the long-term futures contract and the current target market. The indicator should be between 4% and 8% to compensate traders for “locking” the money until the contract expires. Thus, levels below 2% are extremely bearish, while numbers above 10% indicate excessive optimism.

Bitcoin 3 month futures spread per year. Source: Laevitas

The chart above shows that this measure dipped below 4% on June 1st, reflecting traders’ lack of demand for credit (bulls). However, the current reading of 2% is not particularly worrying, given that BTC is down 51% year-to-date.

To rule out externalities specific to the futures instrument, traders must also analyze the Bitcoin options market. The 25% delta error is a telltale sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

Connected: Bitcoin price sees $24K, Ethereum hits 2-month high as US inflation eases

If these traders fear a Bitcoin price crash, the margin of error will exceed 12%. On the other hand, the general voltage reflects a negative 12% error.

Bitcoin 30 day options 25% delta error: Source: Laevitas

Data shows that the margin of error has been in the range of 3% to 5% since August 5, which is considered a neutral zone. Options traders are no longer overcharging for gate protection, which means they may lack excitement, but at least they have abandoned the “fear” feeling seen in recent months.

Based on Bitcoin’s current bullish channel pattern, Bitcoin investors probably shouldn’t worry too much about the lack of buying demand, according to futures market data.

Of course, there is healthy skepticism reflected in derivative metrics, but the path to a $29,000 BTC price remains clear as long as inflation and employment numbers are under control.

The views and opinions expressed here are theirs alone author and do not necessarily reflect the views of Cointelegraph. Every investment and business involves risk. You should conduct your own research when making a decision