The cryptocurrency market has risen by 12.5% in the past 7 days, reaching a market value of US$2.44 trillion. However, this move does not seem to inspire confidence, as the same level was tested 16 days ago, when Ethereum (ETH) attempted to break through $3,650 in the next six days and then saw a 27% retracement.
Regulation seems to be a key factor for buyers, as the U.S. House of Representatives is expected to $1 trillion infrastructure bill This month. In addition to defining who is eligible to become a broker, the legislation will also impose anti-money laundering (AML) and Know Your Customer (KYC) requirements on multiple cryptocurrency transactions, which may also be detrimental to the DeFi agreement.
As shown above, the negative performance of the top 10 cryptocurrencies has affected investor sentiment in the past 30 days. For this reason, it is important to measure more than just the nominal price of Bitcoin.Traders should also analyze Bitcoin Derivatives indicators, such as futures market premium and option skew.
Futures premium shows that traders are slightly bullish
The benchmark interest rate is also often referred to as the futures premium, which measures the difference between the long-term futures contract and the current spot market level.
In a healthy market, the annualized premium is expected to be 5% to 15%. This situation is called a futures premium. This price difference is caused by sellers asking for more money to extend the detention time.
As mentioned above, the current 9% annualized premium is neutral, but it has improved compared to previous weeks. This shows that traders are cautiously optimistic, leaving room for further leverage after the confidence is fully restored.
Option traders exit the “fear” mode
In order to eliminate the unique externalities of futures instruments, the option market should also be analyzed.
The 25% delta skew compares similar call (buy) and put (sell) options. When “fear” prevails, this indicator will become positive because the premium for protective puts is higher than for call options with similar risks.
When the market maker is bullish, the opposite is true, causing the 25% delta skew indicator to shift to the negative zone. Readings between minus 8% and plus 8% are generally considered neutral.
Note how Bitcoin options traders entered the “fear” level on September 25, as the $41,000 support level has been tested many times. Despite this, drastic changes have taken place since September 30, and the indicator is now in the neutral zone.
As far as the current situation is concerned, the 25% deviation between futures basis and options shows a typical “glass half full” scenario. This means that even if Bitcoin reaches its highest level in 27 days and is above the resistance level of $50,000, there is still room for buyers to increase leverage before the indicator shows signs of over-expansion or excitement.
Breaking through $50,000 under the current meager derivatives data is usually interpreted as a weakness. However, considering that the total market value of cryptocurrencies is still the same as 30 days ago, and regulatory concerns have not eased, there is no reason to worry. At present, neither the futures market nor the options market has shown any bearish signs.
The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.