Bitcoin futures go backwards for the first time in a year

Bitcoin futures go backwards for the first time in a year

The monthly bitcoin (BTC) chart is very fast, with the sub- $ 18,000 level seen over the weekend at its lowest price since December 2020. The current optimism of the bulls relies on the $ 20,000 transformation as support, but Derivative indicators tell a whole different story, as professional traders are still extremely skeptical.

Price 12-hour BTC-USD at Kraken. Source: Trade View

It’s important to remember that the S&P 500 index fell 11% in June, with even multi – billion dollar companies like Netflix, PayPal and Caesars Entertainment correcting losses of 71%, 61% and 57% respectively.

The US Federal Open Market Committee raised its benchmark interest rate by 75 basis points on June 15, while Federal Reserve Chairman Jerome Powell suggested that the outlook could be more aggressive, as the monetary authority continues to struggle to control inflation. However, investors and analysts fear that this measure will increase the risk of a recession. In a note to clients published June 17, Bank of America states:

“Our worst fears are about the affirmative feed: it’s far behind and it’s playing a dangerous game of catching up now.”

In addition, according to analysts at global investment bank JPMorgan Chase, the highest ever total stablecoin market share within crypto indicates “oversold conditions and a significant rise in cryptocurrencies as a result.” According to analysts, the lower percentage of stablecoins in the total capitalization of the crypto market is associated with limited capacity for the crypto.

Currently, crypto investors are facing a mixed attitude between fears of the recession and optimism toward the $ 20,000 support gaining strength as constables could eventually slad to bitcoin and others. For this reason, derivative data analysis is valuable for understanding whether investors are pricing higher downturn contradictions.

Bitcoin futures premium becomes negative for the first time in a year

Retail traders generally avoid quarterly futures contracts because of their price difference from spot markets, but they are preferential instruments for professional traders because they avoid constant volatility in the rate of contract financing.

These fixed term contracts typically trade at a small premium to spot markets, as investors demand more money to maintain a settlement. This situation is not exclusive to cryptocurrency markets. Therefore, futures contracts should trade at an annual premium of 5-12% in healthy markets.

3-month annual bitcoin futures premium. Source: Laevitas

The bitcoin futures premium failed to break above the 5% neutral threshold, as the $ 29,000 support remained firmly at the bitcoin price until June 11th. Whenever this indicator decreases or turns negative, it is a frightening red flag that indicates a situation known as backwardness.

To rule out instrument-specific externalities of futures instrument, traders should also analyze bitcoin options markets. For example, the skew represents a 25% delta when bitcoin market makers and arbitrage desktops overcharge up or down protection.

In bullish markets, an option gives investors a higher chance of a price increase, causing the skewed indicator to fall by -12%. On the other hand, widespread panic in a market sends a positive outflow of 12% or more.

skew delta 25% of 30-day bitcoin options: Source: Laevitas

The 30-day skew delta peaked at 36% on June 18, the highest on record and typical of high-volume markets. The 18% rise in the price of bitcoin from the low of $ 17,580 was apparently enough to give derivatives traders confidence. If the skewed 25% indicator is still detrimental to the risk assessment below, at least it is no longer at levels that indicate extreme negativity.

Analysts expect ‘maximum damage’

Some indicators suggest that bitcoin could be upside down on June 18, especially when the $ 20,000 strength came into effect. On the other hand, market analyst Mike Alfred made it clear, in his view, “bitcoin has not been made selling out of the big players. They want to bring it down to a level that will do the most damage to the most exposed actors like Celsius. “

Until traders gain a better insight into the risk of infection from Terra ecosystem pressure, the potential insolvency of Celsius and the liquidity issues facing Three Arrows Capital, the chances of a new bitcoin price fall are high.

The views and opinions expressed herein are those of theauthor and do not necessarily represent those of Cointelegraph. All investments and trades involve risk. You should do your own research before making a decision.

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