Bitcoin prices went upside down, but where are all the indebted long traders?

Bitcoin prices went upside down, but where are all the indebted long traders? – Mail Bonus

This week’s Bitcoin (BTC) chart leaves little doubt that the symmetrical triangle pattern is breaking up after squeezing the price for almost 20 days. However, derivatives tell a completely different story because professional traders are not willing to add indebted positions and charge too much for a side defense.

BTC-USD 12 hour price in Kraken. Source: TradingView

Will the BTC reverse the policy even when the macroeconomic situation collapses?

Whether BTC converts the $ 30,000 to $ 31,000 level in support depends to some extent on the performance of global markets.

The last time US stock markets faced a seven-week decline was more than a decade ago. Sales of new apartments in the United States declined for the fourth month in a row, which is also the longest cycle since October 2010.

The Chinese saw a huge 20% year-on-year decline in their service demand, which is the worst change in history. According to government data released on May 30, consumer spending on Internet services from January to April was $ 17.7 billion.

The value of European stock auctions also reached its worst level in 19 years after rising interest rates, inflation and macroeconomic uncertainty led investors to seek refuge in cash. According to Bloomberg, the initial public offering and follow-on business generated only $ 30 billion by 2022.

All of the above makes it easier to understand the discrepancy between the recent $ 32,300 Bitcoin recovery and weak derivatives data because investors are pricing a higher probability of a downturn, driven primarily by a deteriorating global macroeconomic situation.

Derivatives are neutral to bearish

Retailers typically avoid quarterly futures because of their price differences from local markets, but they are the preferred tool of professionals because they avoid ever-changing financing rates in perpetual 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 3 months future premium per year. Source: Laevitas

According to data from Laevitas, the future spread of Bitcoin has been below 4% since April 12. This reading is typical of a bearish market and it is worrying that the scale did not manage to break above the 5% neutral threshold even when the price moved towards $ 32,000.

To exclude external effects specific to the futures instrument, traders must also analyze the Bitcoin options market. The 25% delta error is optimal as it shows when Bitcoin exchanges and dashboards are overloaded for upside or floor protection.

In a bearish market, option investors are more likely to fall in price, causing the error indicator to exceed 12%. On the other hand, the general tension in the cattle market causes a negative 12% or less error.

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

The 30-day delta error peaked at 25.4% on May 14, the highest record ever and typical of a very bearish market. On the other hand, the situation improved on 30 and 31 May, as the indicator stabilized at 14%, but is pricing a higher probability of a price collapse. Yet it shows a modest recovery in attitudes from derivatives trading.

The risk of a global economic downturn is probably the main reason why Bitcoin options markets are stressed and why future spreads are still low. BTC’s 30-day correlation against the S&P 500 index is 89%, which means that traders have fewer incentives to place bullish bets on cryptocurrencies.

Some measurements suggest that the stock market may have bottomed out last week, especially as it is 8.5% above the May 20 low within the day, but weak statistics weigh on investor sentiment. This promotes risk aversion and has a negative effect on the cryptocurrency market.

Until there is a better definition of traditional finance and the world’s largest economies, Bitcoin traders should continue to avoid building indebted long positions and maintaining a bearish stance, a feature that is now reflected in the options markets.

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.