In fact, key trade indices are hovering barely above the worst-case scenario.
On Monday, Bitcoin (BTC) plummeted to $39,650, a 42.6 percent loss from its all-time high of $20,000 on Nov. 22, 2021. Some expect a crypto winter based on the $2.1 billion in leveraged long crypto futures liquidated last week.
This downward trend has been in place for 63 days, signifying a price decrease below $40,000.
After the Federal Reserve‘s December Federal Open Market Committee meeting on Jan. 5, investors’ confidence in the U.S. economy continued to decrease. According to the monetary policy authority, there will be a reduction of interest rates and the balance sheet in 2022.
Kazakhstan’s political unrest peaked on January 5th, significantly stressing the markets. Protests forced the shut down of the country’s internet, resulting in a 13.4 percent drop in Bitcoin network hashrate.
Futures Traders Remain Unconcerned
Futures premium, or the basic rate, will gauge how bullish or bearish professional traders are.
This indicator considers longer-term futures contracts and current market values. Contango, or a 5-to-15% annual premium, is in solid markets.
Backwardation happens when merchants request additional money to delay payment.
Notably, the premium on the futures market has been above 7% for two months. Considering the lack of strength in the Bitcoin price throughout this time period, this is a fantastic indicator.
Bullish Options Traders
The evaluation of the options markets with futures markets will eliminate futures-only externalities.
The 25 percent delta skew compares similar call (buy) and put (sell) options for the same security. In times of fear, the premium on protective put options is higher than on similar risk call options.
As a result, the delta skew indicator shifts to the negative side when greed is in the air.
Neutral readings between -8% and 8% are within the range. The 25 percent delta skew indicator entered the “fear” area at 10% in December.
Consequently, options market traders are on the edge of neutral-to-bearish attitude because the indicator stands at 8%. Since buying put options is getting more expensive, market markers and arbitrage desks are unsure that $39,650 was the bottom.
Derivatives traders‘ long positions (buyers) are swiftly losing confidence, as seen by $2.1 billion in aggregate futures contract liquidations. Time will tell if the market has bottomed, but pro traders don’t seem to be helping much.
