This week’s bitcoin chart (BTC) has little doubt that the symmetrical triangle pattern is breaking higher after the price has been constrained for almost 20 days. However, derivatives metrics tell a whole different story, as professional traders do not want to add overcharged leverage and downside protection.
Will the BTC course go back as macroeconomic conditions fall?
Whether BTC moves from the $ 30,000- $ 31,000 level to the support level depends to some extent on the performance of global markets.
It was the last time U.S. equity markets were facing a downturn of seven weeks in a row more than a decade ago. Sales of new homes in the United States fell for the fourth straight month, the longest streak since October 2010.
Its services on demand fell sharply by 20% year-on-year in China, the worst development on record. According to government data released on May 30, consumer spending on internet services from January to April amounted to $ 17.7 billion.
The value of equity offers in Europe also peaked in 19 years after rising interest rates, inflation and macroeconomic uncertainties pushed investors into cash positions. According to Bloomberg, initial public offerings and follow – on markets raised only $ 30 billion in 2022.
All of this sheds some light on the gap between the recent bitcoin price rally to $ 32,300 and weak derivatives data as investors price the slump on a higher slowdown, mainly due to the evolving global macroeconomic conditions. olcas.
The parameters for derivatives are neutral to pessimistic
Sole traders generally avoid quarterly futures contracts because of their price difference from spot markets, but professional traders are the instrument of choice because they avoid volatility in the funding rate of perpetual contracts.
These fixed month 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.
According to data from Laevitas, bitcoin futures premium has been below 4% since April 12th. This reading is typical in bear markets and it is worrying that the metric failed to cross the 5% neutral threshold, even though the price rose towards $ 32,000.
To rule out futures specific to the futures instrument, traders should also analyze bitcoin options markets. The 25% delta skew is optimal as it shows when Bitcoin market makers and overpricing arbitrage desks protect up or down.
During bear markets, investors are given more chance options for a price crash, causing the skewed indicator to rise above 12%. On the other hand, the general excitement of the bull market has led to a negative hedge of 12% or less.
The 30-day delta skewed peaked at 25.4% on May 14, the highest level ever and typical in extreme markets. However, the situation improved on 30 and 31 May, as the indicator stabilized at 14%, but the chances of a price fall are higher. However, it shows a modest improvement in the mood of derivatives traders.
The risks of a global economic slowdown are probably the main reason why bitcoin options markets are under stress and why the futures premium remains low. The 30-day correlation of BTC against the S&P 500 index is 89%, which means that traders have less incentive to place bullish bets on cryptocurrencies.
Some metrics suggest that the stock market may have been lower than last week, especially as it traded 8.5% above its intraday low on May 20, but weak stock economic figures weigh on investor sentiment. . However, a weak economic downturn is undermining investor sentiment, pushing the risk aversion trend and negatively disrupting cryptocurrency markets.
Awaiting better guidance from traditional finance and the world’s largest economies, bitcoin traders should continue to avoid building long leverage positions and maintain a bearish position, a feature currently reflected in options trading markets.
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.