Bitcoin's current profile creates an interesting risk-reward position for bulls

Bitcoin’s current profile creates an interesting risk-reward position for bulls – Mail Bonus


The Bitcoin (BTC) chart has formed a symmetrical triangle, which now holds a tight range from $ 28,900 to $ 30,900. This pattern has persisted for almost two weeks and could potentially expand for another two weeks before the price takes a more decisive move.

Bitcoin / USD 12 hour price in Kraken. Source: TradingView

For those unfamiliar with technical analysis, a symmetrical triangle can be either bullish or bearish. In that sense, the price merges in a series of lower peaks and higher lows. The crucial moment is a support or resistance revolution when the market finally decides on a new development. Thus, the price could break out in either direction.

According to Bitcoin derivatives data, investors are pricing a higher probability of a downturn, but recent improvements in the global economic outlook could come as a surprise to bears.

The national economy has improved and BTC miners are busy

According to the Cointelegraph, macroeconomic conditions driven by the United States helped drive the cryptocurrency market higher on May 23. Before the market opened, US President Joe Biden announced plans to cut trade tariffs with China, which would boost investor morale.

According to the latest estimates, Bitcoin’s network difficulties will be reduced by 3.3% with the next automatic reset this week. The change will be the largest write-down since July 2021 and it is clear that the declining development of Bitcoin has challenged the profitability of miners.

However, miners are not showing signs of surrender, even as their wallets move to the stock market to reach a 30-day low on May 23, according to Glassnode’s chain analysis platform.

While miners’ attitudes and flows are important, traders should also keep an eye on how whales and brands are positioned in futures and options markets.

Measurements for bitcoin derivatives are neutral to bearish

Retailers usually avoid quarterly futures due to their fixed settlement date and price differences from local markets. The biggest advantage of the agreements, however, is the lack of a volatile financing ratio; hence the prevalence of arbitration and professional traders.

These fixed-term contracts usually trade with a slight premium in the local market because sellers are asking for more money to hold on to settlements longer. This condition is technically known as “contango” and is not limited to cryptocurrencies. Thus, futures contracts should trade at a 5% to 15% annual premium in healthy markets.

Bitcoin 3 months future premium per year. Source: Laevitas

According to the above data, the Bitcoin index has been below 4% since April 12. This reading is typical of a bearish market, but the fact that it has not deteriorated after selling down to $ 25,400 on May 12 is encouraging.

To exclude external effects specific to the futures instrument, traders must also analyze the Bitcoin options market. The 25% delta error is extremely useful because it shows when the Bitcoin arbitration desk and market makers are overloaded for upside or down protection.

If options investors fear a collapse in Bitcoin prices, the error indicator will exceed 12%. On the other hand, the general voltage reflects a negative 12% error.

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

The error rate exceeded 12% on May 9 and entered the “fear” level as options traders charged too much for a side defense. In addition, the recent 25.4% was the worst reading recorded for a scale.

Connected: Bitcoin targets rate the 8th weekly red candle while BTC rates limit losses on weekends

Be brave when most people are scared

In short, BTC options markets are still stressed and this suggests that professional traders are not confident in taking risks. Bitcoin’s futures have been fairly resilient, but the indicator shows a lack of interest from indebted long-term buyers.

Taking a bullish bet may seem the opposite right now, but at the same time, an unexpected price pump would surprise professional traders. Therefore, it creates an interesting risk-reward position for Bitcoin bulls.

The views and opinions expressed herein are those of the authors only 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