The Bitcoin (BTC) monthly card looks rather bad and the price of around $ 18,000 over the weekend was the lowest since December 2020. The bulls’ goal now is to turn $ 20,000 into support, but derivative measures tell a different story, and professionals are still cautious.
It is important to remember that the S&P 500 index fell by 11% in June and that even multi-billion dollar companies such as Netflix, PayPal and Caesars Entertainment have lost 71%, 61% and 57%, respectively, since then.
On June 15, the US Federal Reserve raised the benchmark interest rate by 75 basis points, and Governor Jerome Powell hinted that a more aggressive restraint could be forthcoming as monetary authorities try to keep inflation in check. On the other hand, investors and analysts are concerned that this decision could increase the likelihood of a recession. In a letter to customers on June 17, Bank of America said:
“Our worst fears about the central bank have come true: they have lagged far behind and are now playing a dangerous game to catch up.
Analysts at JPMorgan Chase also say that the record high market share of stablecoins in cryptocurrencies “indicates obsolete conditions and great benefits for the cryptocurrency market from now on. Researchers say that a smaller share of stablecoins in the total market value of cryptocurrencies is associated with limited cryptocurrencies.
Investors in cryptocurrencies are now switching between worrying about a recession and being sure that the $ 20,000 support level will hold, as stablecoins can eventually pour into Bitcoin and other cryptocurrencies. So looking at derivative data could help you determine if you are pricing a higher probability of a recession.
The price of Bitcoin futures will fall for the first time in a year.
Due to differences in prices between quarterly futures contracts and local markets, retailers tend to avoid them. Professional traders, on the other hand, like them because they do not have to worry about contractual financing rates always changing.
Because investors want more money to delay settlement, these fixed monthly contracts often trade with slightly more than the cash market. This is not a problem that only happens in the cryptocurrency market. For this reason, futures contracts should trade at a premium of 5% to 12% per year in healthy markets.
Bitcoin’s spread did not exceed the neutral level of 5% and the price of Bitcoin remained unchanged at $ 29,000 until 11 June. This is a scary, bearish red flag. If this indicator decreases or becomes negative, it means that a reversal is taking place.
Traders must also look at the Bitcoin options market to avoid problems that are unique to the futures device. For example, the 25 percent delta error shows when Bitcoin market makers and arbitration agencies charge too much for upside or downside protection.
As markets rise, investors in options are more likely to rise in price, bringing the error rate below -12 percent. On the other hand, a market with a widespread fear of a positive error of at least 12%.
On June 18, the 30-day delta error reached a new high of 36 percent, which was a new record and showed that bearishness was very strong. Future traders seem to have regained faith in Bitcoin after its price rose 18 percent from its low of $ 17,580. Even though the 25 percent error indicator is still bad for risk pricing, it is not as bad as it used to be.
Experts say that in the coming months, “maximum damage” is likely to occur.
Various signs show that the price of Bitcoin bottomed out on June 18, especially as support for $ 20,000 has gained weight. On the other hand, market analyst Mike Alfred said: “Bitcoin has not got rid of key players,” and he was very clear about that. They will pull it down so that over-exposed players, like Celsius, get hurt the most.
There is a good chance that the price of Bitcoin will fall again until traders have a better idea of how the collapse of the Terra ecosystem, the possible bankruptcy of Celsius and the liquidity problems of Three Arrows Capital could spread.
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