Bitcoin (BTC) has been holding above $20,000 for the past nine days, but deteriorating conditions in traditional markets have traders doubting whether this support will hold.
On November 3, the Bank of England raised interest rates by 75 basis points to 3%, the biggest increase since 1989. The risks of a prolonged recession have also increased, with the monetary policy committee trying to keep inflationary pressures under control. discipline.
Britain’s monetary authority noted that the latest growth and inflation projections present a “very challenging” outlook for the economy. The committee’s statement said that “high energy prices and tighter financial conditions are putting pressure on spending,” putting negative pressure on employment data.
The US Federal Reserve also raised interest rates on November 2, for the fourth time in a row, taking rates to their highest level since January 2008. Confirmation of a conservative approach by central banks may partly explain why why bitcoin failed to break above the $21,000 resistance in October. 29, and has since fallen 4.5%.
We look at derivatives metrics to better understand how professional traders are positioning themselves under current market conditions.
Options traders are not particularly optimistic
The 25% delta skew is a telltale sign that market makers and arbitrage tables are overpricing upside or downside protection.
In bear markets, option investors give a greater chance of a price drop, causing the skewness indicator to rise above 10%. On the other hand, bullish markets tend to push the skewness indicator below -10%, which means bearish bulls are discounted.
The delta skew exceeded the 10% threshold until October 26, indicating that options traders were less inclined to offer downside protection. A more balanced picture emerged, but the $21,000 resistance tested on October 29 was not enough to inspire confidence among options traders.
Currently, the 60-day skew delta is 6%, so whales and market makers are pricing similar odds of a price rally and decline. However, other data shows low confidence as BTC approaches the $20,000 support.
Leveraged buyers shrugged off the recent rally
The long-to-short metric excludes externalities that may affect options markets only. It also collects data from exchange client sites on spot, perpetual and quarterly futures, providing better insights into the position of professional traders.
There are occasional methodological discrepancies between different exchanges, so readers should watch for changes rather than absolutes.
While bitcoin gained 9% between October 22 and October 29, professional traders reduced their leveraged long positions slightly, according to the long-to-short indicator.
For example, the Binance Trader Ratio improved slightly from the beginning at 1.25, but then ended the period below its initial level at 1.22. Meanwhile, Huobi posted a slight decrease in its long-to-short ratio, with the indicator falling from 1.03 to 1.00 in the seven days to 29 October.
On the OKX exchange, the ratio decreased slightly from 1.01 on 22 October to 0.94 on 29 October. This means that traders on average were not confident enough to add leverage to bullish positions.
Also read: Robinhood is not giving up on cryptocurrency despite a 12% drop in revenue in this area in the third quarter
$20,000 support is weak, but traders are not bearish
Both of these derived metrics—skewed options and long-to-short ratio—suggest that the 4.5% correction in bitcoin price since testing $21,000 on October 29 is supported by a moderate level of distrust from leveraged buyers.
More bullish sentiment would have pushed the 60-day delta into the negative zone and possibly pushed the long-to-short ratio to higher levels. It is important to note that even professional traders can misread the market, but the current derivative market reading favors low support at $20,000.
On an optimistic note, there is no indication that professional traders are expecting a negative move. Basically, nothing changes even if the price visits the $19,000 range again, as 50 days have passed since bitcoin traded above $22,000.
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