Since May 10, the Bitcoin (BTC) chart has been showing a relatively narrow range of price movement and the cryptocurrency has often not exceeded the $ 32,000 resistance.
The trading turmoil is partly indicative of uncertainty in the stock market, with the S&P 500 index hovering between 3,900 and 4,180 over the same period. On the one hand, the euro area is experiencing economic growth where gross domestic product has increased by 5.1% in one year. On the other hand, inflation continues to rise sharply, reaching 9% in the UK.
The proposed regulatory framework for digital assets, which was laid before the U.S. Senate on June 7, has further increased bitcoin volatility. This bipartisan bill gives 69 pages, supported by the Sen. Cynthia Lummis of Wyoming and Senator Kirsten Gillibrand of New York address the CFTC’s authority on digital asset spot markets.
On June 3, the South Korean Financial Surveillance Service (HSE) launched an investigation into 157 payment gateway services operating with digital assets. Earlier, on May 24, South Korean authorities opened an investigation against Do Kwon, the protagonist in the Terra incident.
The U.S. Securities and Exchange Commission (SEC) also opened an investigation against Binance Holdings on June 6. Binance is the world’s largest cryptocurrency exchange by volume and the SEC is assessing whether the initial offering of BNB tokens is a breach of securities rules.
On June 6, IRA Financial Trust, a platform that provides self-managed retirement accounts and pensions in digital assets, filed a lawsuit against cryptocurrency exchange Gemini and claimed that $ 36 million in cryptocurrencies were lost from client accounts for breach of February 8th. Custody Gemini.
We look at Bitcoin futures data to understand how professional traders, including whales and market makers, are positioned.
Derivatives metrics reflect bearish investor expectations
Traders should analyze bitcoin futures market data to understand how professional traders position themselves. Quarterly contracts are the instrument of choice for experienced traders to avoid volatility in the perpetual-futures financing rate.
The underlying indicator measures the difference between long-term futures and current spot market levels. The annual bitcoin futures premium should be between 5% and 10% to compensate traders for “locking in” the money for two or three months until the contract expires.
The bitcoin futures premium has been below 4% since April 12, a typical reading for bear markets. What is still most worrying is that the last time these professional traders were bullish was more than six months ago when the metric broke above the 10% threshold.
To rule out instrument-specific externalities of futures instrument, traders should also analyze bitcoin options markets. The 25% skew delta is a landmark when Bitcoin market makers and arbitration desks overcharge up or down protection.
During bull markets, an option gives investors a greater chance of price increases, leaving the asymmetry indicator below a negative 12%. On the other hand, the widespread panic of the bear market has led to positive skews of 12% or more.
The 30-day delta skew increased from 12.5% to 23% between June 1 and June 7, indicating that options traders are pricing in a bearish move. However, this indicates a modest improvement in mood compared to the previous two weeks.
Cryptocurrency regulation and weak economic data are clearly weighing on investor sentiment, while derivative data shows that professional bitcoin traders are avoiding leverage and reluctance to risk the downturn.
For now, it’s clear that the bears are comfortable with the $ 32,000 settlement as the resistance level and the fall is likely to continue repeatedly towards the $ 28,200 level.
The views and opinions expressed herein are those of the author and do not necessarily represent those of Cointelegraph. All investment and business transactions involve risk. You should do your own research before making a decision.