There is no doubt that Bitcoin has been bearish over the past few months (Bitcoin), but throughout the period, derivatives indicators have been relatively neutral. This may be because cryptocurrencies have a strong record of volatility, and are even expected to pull back 55% from all-time highs.
After two months of trying to maintain the support of $30,000 and finally losing it on July 20, the futures premium and option deflection turned bearish.Even PlanB’s stock-flow estimation model It is expected that the price will not be less than 30,000 USDThe model uses the stock-to-flow ratio, which is defined by the number of bitcoins currently in circulation and the annual issuance of newly mined bitcoins.
On-chain data is positive, but derivatives indicators are not optimistic
On-chain analysis shows that An average of 36,000 BTC is withdrawn from the exchange every month Usually interpreted as accumulation. However, this superficial analysis fails to acknowledge the increasing use of tokenized Bitcoin in decentralized finance (DeFi) applications.
The graph above shows that in the past three months, Wrapped Bitcoin (WBTC) and RenBTC (RENBTC) have increased by 40,660 BTC. This number does not take into account BlockFi, Nexo, Len, and deposits of multiple services that provide users with cryptocurrency deposit income.
The removal of bitcoins previously deposited on exchanges may indicate that traders’ intention to sell in the short term has diminished. At the same time, however, it may also represent investors seeking other ways to achieve higher returns. In short, these tokens may always exist as collateral or long-term holdings on exchanges.
As mentioned earlier, the shift in derivatives indicators to negative values should be more important than assumptions about the bullish or bearish interpretation of on-chain data. In the preliminary analysis, the analyst should review the premium of the futures contract, also known as the basis.
This indicator allows investors to understand how bullish or bearish professional traders are, because it measures the difference between monthly futures contracts and the current spot market price.
The neutral benchmark interest rate should be between 7% and 15% per annum. This price difference is caused by sellers asking for more money to delay settlement. This situation is called a futures premium.
However, when this premium fades or becomes negative, it is a very bearish situation called spot premium. July 20th was the first time that the indicator sustained a 2.5% negative level for more than 12 hours.
Currently, after Bitcoin loses the critical $30,000 support level, professional traders may tend to be bearish, but further confirmation can be obtained by looking at the options market.
related: This is a way to trade Bitcoin, even if the price of BTC is teetering on the abyss
Professional traders are seeking protective puts
Unlike futures contracts, there are two different instruments in options. Call options provide buyers with upward price protection, and put options are the right to sell bitcoin at a fixed price in the future. Put options are usually used in neutral to put strategies.
Whenever the ratio of put options increases, it means that the open interest of these neutral to put contracts is increasing, which is usually interpreted as a negative signal. The latest data of 0.66 is still favorable for call options, but these instruments are gradually losing ground.
At present, there is sufficient evidence that the futures and options markets are bearish, which has not been the case in the past two months. This shows that even professional traders lack confidence after failing to maintain the $30,000 support level in the past 48 hours.
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