Bitcoin (BTC) has been undergoing a downward triangle pattern for the past three weeks, and while some traders consider this to be a bullish reversal pattern, the $ 19,000 support remains a crucial level in determining the fate of the bulls.
Despite the apparent lack of a clear price floor, the metrics of bitcoin derivatives have improved significantly since June 30 and positive news from global asset manager VanEck could ease the mood of traders.
On July 5, two pension funds in the US state of Virginia announced a $ 35 million pledge for a cryptocurrency-focused VanEck investment fund.
The same day, a subsidiary of the Huobi exchange received its Financial Services Business (MSB) license from the US Financial Crimes Enforcement Network (FinCEN). The Seychelles-based company said the license creates a base for expanding its cryptocurrency-related business in the United States.
On July 7, more positive news erupted: Celsius Network’s decentralized betting and financial lending platform announced that it had fully repaid its Maker Protocol (MKR) debt.
Celsius is one of those cryptocurrency yielding platforms on the verge of insolvency after historical losses across multiple sites. Forced sale of leveraged positions through decentralized exchanges and financial apps (DeFi) has accelerated the recent crash in cryptocurrency prices.
At the moment, traders are facing mixed feelings between the potential effects of the infection and their hope that $ 19,000 support is growing. For this reason, analyzing derivative data is crucial to understand whether investors are pricing higher contradictions in a market downturn.
Bitcoin futures premium becomes a bit positive
Retail traders generally avoid quarterly futures due to their fixed set date and price difference from spot markets. However, the main advantage of these contracts is the lack of volatility in the funding rate, and thus the prevalence of arbitration centers and professional traders.
These fixed month contracts typically trade at a small premium to spot markets, as sellers demand more money to maintain a settlement longer. Called ” contangoand is not exclusive to cryptocurrency markets. Therefore, the futures should trade at an annual premium of 5-10% in healthy markets.
The annual bitcoin futures premium turned negative on June 28, reflecting weak demand from leveraged buyers. Still, the bearish pattern did not hold for long, as the indicator moved into the positive zone on July 4th.
Read also: Genesis Trading CEO Confirms Disclosure for 3AC, Parent Helps Cover Loss
Options traders remain skeptical of all price rallies
To rule out externalities specific to the Bitcoin Futures instrument, traders should also analyze options markets. For example, the 25% delta skew shows when overprice arbitrage offices protect up or down.
Option traders are given a greater chance of price rise during bull markets, causing the skewed indicator to fall by -12%. At the same time, the general feeling of fear of a market triggers a positive outburst of 12% or more.
June 18 was the highest level of 30-day delta skewed on record, which is typical in bear markets. However, the current level of 16% of this asymmetry reflects the reluctance of investors to provide disadvantage protection, reflecting the overload of placement options.
Infection remains a threat that puts pressure on the market
It’s hard to say if $ 17,580 was in the low cycle, but some traders attribute the move to the inability of Three Arrows Capital to meet its margin calls.
Some traders want a “generational bottom,” but there is still a long way to go before investors turn bullish as bitcoin remains locked into the formation of a descending triangle.
3AC was liquefied at the bottom of the knee, send everything into the super cycle in a hurry
—Hentaiavenger66 (@ hentaiavenger66) July 6, 2022
3AC is liquefied to the knee floor, send everything into the super cycle with haste. – hentaiavenger66 (@ hentaiavenger66) July 6, 2022
On the one hand, bitcoin derivatives metrics show a modest improvement since June 30th. Investors, on the other hand, are still on the lookout for further arrests from a venture capital and cryptocurrency asset manager.
Sometimes the best trade-off is to wait for a clearer market structure and avoid leverage at all costs, regardless of your certainty about the bottom of a cycle.
The views and opinions expressed herein are those of one the author and those do not necessarily represent Cointelegraph. All investment and business transactions involve risk. You should do your own research before making a decision.