Data on Bitcoin derivatives show no "bottom" in sight as traders avoid indebted long positions

Data on Bitcoin derivatives show no “bottom” in sight as traders avoid indebted long positions – Mail Bonus

Bitcoin (BTC) lost $ 28,000 in support on June 12 due to deteriorating macroeconomic conditions. US 10-year yields on June 10 ended at 3.10%, the highest level since December 2007. This shows that traders are demanding higher interest rates to keep their debt documents and expect inflation to remain a persistent challenge.

Louis S. Barnes, a senior credit representative at Cherry Creek, said that since the United States announced its highest inflation in 40 years, the securities securities markets (MBS) had no buyers. Barnes added:

“Shares fall by 2% today [June 10]but would decrease much more compared to what the suspension of housing will mean. “

MicroStrategy and Celsius leverage use raised warnings

Bitcoin sales are increasing pressure on the cryptocurrency market and various media are debating whether the US Nasdaq-listed analytics and business intelligence company MicroStrategy and its $ 205 million Bitcoin mortgage with Silvergate Bank will add to the current cryptocurrency collapse. The interest loan was issued on March 29, 2022 and secured by Bitcoin, which is stored in the account of a mutually authorized custodian.

As stated in Microstrategy’s earnings statement from CFO Phong Le on May 3, if Bitcoin fell to $ 21,000, additional margins would be needed. However, on May 10, Michael Saylor announced that the entire 115,109 BTC position could be mortgaged, reducing bankruptcy to $ 3,562.

Finally, Celsius’s Crypto betting and lending platform stopped all online withdrawals on 13 June. Bankruptcy speculation soon emerged as the project shipped huge amounts of wBTC and Ether (ETH) to avoid liquidation at Aave (AAVE), a popular mortgage and lending platform.

Celsius reported that assets under management exceeded $ 20 billion in August 2021, which was more than enough to cause a doomsday scenario. While there is no way to determine how this liquidity crisis will develop, the event caught Bitcoin investors at the worst possible moment.

Bitcoin futures are close to bearish territory

Bitcoin’s futures market, the main derivative measure, briefly moved to the negative zone on June 13. The measurement compares long-term forward contracts and traditional local market prices.

These fixed calendar contracts usually trade at a slight premium, indicating that sellers want more money to hold on to settlements for longer. As a result, three-month futures contracts should trade at a 4% to 10% annual premium in healthy markets, a condition called contango.

Whenever this indicator fades or becomes negative (backwards) it is a frightening red flag because it indicates a bearish feeling.

Bitcoin 3 months future premium per year. Source: Laevitas.ch

Although the forward premium has already been below the 4% threshold for the past nine weeks, it managed to maintain a moderate premium until 13 June. Although the current 1% premium may seem optimistic, it is the lowest level since April 30 and stands at the edge of general bearish sentiment.

An unhealthy derivatives market is a scary signal

Merchants should analyze the pricing of Bitcoins to further prove that the structure of the cryptocurrency market has deteriorated. For example, the 25% delta error compares similar call (buy) and sell (sell) options. This measure will be positive when fear prevails because the protective put option is higher than similar risk options.

The opposite is true when greed is the dominant mood, causing the 25% delta error indicator to move to the negative zone.

Deribit 30 days Bitcoin options 25% delta error. Source: laevitas.ch

Readings between negative 8% and positive 8% are generally considered neutral, with the 26.6 peak on 13 June being the highest reading ever recorded. This aversion to pricing downsides is unusual even before March 2020, when the oil futures fell on the negative side for the first time in history and Bitcoin collapsed below $ 4,000.

The main message from Bitcoin derivatives markets is that professional traders are not willing to add credit despite very low costs. Furthermore, the ridiculous price range for the sale (option) pricing shows that the June 13 collapse of $ 22,600 came as a surprise to experienced arbitration boards and brands.

For those who aim to “buy the dip” or “catch a falling knife”, a clear bottom will only form when derivative figures indicate that the market structure has improved. It will require the future BTC premium to recover to the 4% level and the options market to find a more balanced risk assessment as the 25% delta error returns to 10% or lower.

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