The Bitcoin (BTC) time chart of the month to date is very bearish and the under- $ 18,000 level seen over the weekend was the lowest price seen since December 2020. The current hope of the Bulls depends on turning $ 20,000 to support, but derivatives tell a completely different story where professionals are still very skeptical.
It is important to remember that the S&P 500 index fell by 11% in June and even multi-billion dollar companies such as Netflix, PayPal and Caesars Entertainment have corrected with 71%, 61% and 57% losses, respectively.
The US Open Market Committee raised its benchmark rate by 75 basis points on June 15, and Governor Jerome Powell hinted that a more aggressive restraint could be forthcoming as monetary authorities continue to fight inflation. However, investors and analysts fear that this measure will increase the risk of recession. According to a Bank of America customer comment released on June 17:
“Our worst fears around the central bank have been confirmed: they fell far behind in their careers and are now playing a dangerous game to recover.
Furthermore, according to analysts at international investment bank JPMorgan Chase, stablecoin’s record total market share in cryptocurrencies is “indicating the sell-off conditions and significant benefits for the cryptocurrency market here. According to experts, a lower percentage of stablecoins in the total market value of cryptocurrencies is associated with limited cryptocurrencies.
At present, cryptocurrencies are facing a mixed mix between fears of recession and optimism towards support for $ 20,000 strengthening, as stablecoins could eventually flow into Bitcoin and other cryptocurrencies. For this reason, derivatives analysis is valuable for understanding whether investors are pricing a higher probability of a downturn.
Bitcoin’s futures will be negative for the first time in a year
Retailers usually avoid quarterly futures due to their price differences from local markets, but they are preferred instruments by professionals because they avoid constant fluctuations in the financing ratio of contracts.
These fixed monthly contracts usually trade at a slight premium to the placement markets because investors demand more money to hold on to the settlement. This situation is not just for the cryptocurrency market. As a result, futures contracts should trade at a 5% to 12% annual spread in healthy markets.
Bitcoin’s futures did not exceed the 5% neutral threshold, while the Bitcoin price stuck to the $ 29,000 support until June 11th. Whenever this indicator fades or becomes negative, it is a frightening, bearish red flag that indicates that the situation is known as backward.
To exclude external effects specific to the futures instrument, traders must also analyze the Bitcoin options market. For example, the 25% delta error shows when Bitcoin exchanges and tables are overloaded for upside or down protection.
In bullish markets, option investors give a higher probability of a price pump, which causes the error indicator to fall below -12%. On the other hand, the general market panic causes a 12% or higher positive error.
The 30-day Delta error peaked at 36% on June 18, the highest record since its inception and typical of a very bearish market. It seems that the 18% rise in Bitcoin prices from the $ 17,580 bottom was enough to restore confidence in derivatives trading. While the 25% bias indicator is still unfavorable for pricing downside risk, at least it no longer sits at the levels that reflect high aversion.
Experts expect “maximum damage” ahead
Some indicators suggest that Bitcoin may have bottomed out on June 18, especially as support for $ 20,000 has strengthened. On the other hand, marketing expert Mike Alfred made it clear that, in his opinion, “Bitcoin has not worn off big players. They will take it down to a level that will cause maximum damage to over-exposed players like Celsius.”
Until traders have a better view of the risk of infection from the collapse of the Terra ecosystem, the possible bankruptcy of Celsius and the liquidity problems facing Three Arrows Capital, the probability of another Bitcoin price collapse is high.
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.
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