Bitcoin

Bitcoin futures data shows the market prefers bulls despite a $ 1500 plunge

The sudden drop in Bitcoin (BTC) prices by $ 1,500 on August 2 led to the settlement of more than $ 1 billion in futures contracts and it also caused a sharp drop in prices for many of the major alternative currencies.

This massive figure represents 18% of the total open positions of $ 5.6 billion and has undoubtedly led to the overvaluation increasing to $ 10,560.

Oddly enough Open interest on futures recovered half of this loss in less than 48 hoursand is currently $ 5.2 billion. Derivative indicators such as contango (base), the financing rate, the 25% delta bias options and the put / call ratio are practically intact.

Bitcoin futures data shows the market prefers bulls despite a $ 1500 plunge
Bitcoin futures data shows the market prefers bulls despite a $ 1500 plunge

Despite such a strong price movement The positive expectations of investors regarding the Bitcoin price remain unshakableBecause there is not a single indicator that indicates excessive or bearish optimism.

This is remarkably different from May 10, when a massive drop of $ 1,400 brought most indicators to a declining level. This was the last time settlements exceeded $ 1 billion.

There was hardly any temporary incidence of open interest

Bitcoin futures aggregate open positions

Bitcoin futures ensure open interest. Source: Skew

Notice how the recent V-shaped open interest recovery differs from mid-May. Back then, open futures positions lost $ 1.2 billion and it took 22 days to hit the $ 3.6 billion mark again.

Contango remained stable

By measuring the premium for 3-month futures contracts at the current spot level, it can be concluded whether professional traders tend to be bullish or bearish.. A healthy market should have a slightly positive annual rate, a situation known as contango.

Bitcoin 3-month futures annualized premium

Annualized 3-month Bitcoin futures premium. Source: Skew

The premium fell slightly after a few days of flirting with an annualized base rate of 15%, which is quite high compared to the 1-year average of 6.5%.

It is now at a healthy 11.5% level, This suggests positive expectations as professional traders charge more money to postpone financial processing.

In contrast, the 3-month annualized futures base flirted with the downtrend in May and took over a month to return to a healthy 5% level.

The financing of permanent contracts is normalizing again

For perpetual futures, also known as reverse swaps, the financing rates are usually calculated every 8 hours. A positive interest rate indicates that longs use more leverage than short, so they pay that interest rate.

Bitcoin Perpetual Contract Funding Rate

Bitcoin perpetual contract financing rate. Source: Skew

Rates above 0.10% for 8 hours are unusual but not alarming. This equates to 2.1% per week and would only put pressure on buyers to reduce leverage if they maintained these values ​​for several days.

The funding rate has dropped to a very healthy level, indicating that there are no signs of a bear market or excessive influence from buyers. The current situation is none other than the May 10 collapse when the funding rate was negative, which meant sellers paid to keep positions open.

Bitcoin Perpetual Contract Funding Rate

Bitcoin perpetual contract financing rate. Source: Skew

The graph above shows the funding rate, which reached the -0.13% level in May, while positive funding would not be given until three weeks later.

The 25% delta bias option markets remain optimistic

The 25% delta bias measures how the most expensive market rates bullish call options versus equivalent bearish put options.

Bitcoin 3 month options 25% delta offset

3-month bitcoin options 25% biased delta. Source: Skew

The delta bias of 25% is an indicator of fear / greed among option traders and is currently 12% negative. This means that the upward protection is more expensive. This is another positive indicator as it is generally between -15% and + 15%.

Bitcoin 3 month options 25% delta offset

3-month bitcoin options 25% biased delta. Source: Skew

This indicator remained close to 4% after the May 10 collapse. This indicates a slight downward trend. The premium for downside protection options (put) was higher than for bullish calls.

The put / call ratio option remains optimistic

The put-call option ratio measures the total open interest of call options versus put options.. Generally, call options are used for bullish strategies, while put options are used for bearish strategies.

Put / call ratio of bitcoin options

Put / call ratio of bitcoin options. Source: Skew

The current put / call ratio of 67% means that open interest put (bearish) options are 33% smaller than call (bullish) options. The 1-year average is 59%, indicating that option traders generally spend more money on call options and expect price increases.

On the other hand, the put / call indicator peaked at 80% just three days before May 10th. Despite remaining in the bullish zone, this was the smallest difference between open call positions and put options within 10 months.

Most indicators currently favor bulls

There is no evidence that the recent fall in price of $ 1,500 on Sunday has somehow lowered the positive expectations of professional investors. There is undeniable data from the derivative markets that are different from the May 10 collapse when Bitcoin took 24 days to hit a new high.

Professional traders have tended to be optimistic since July 24th There is no evidence that such a significant drop in prices has shaken buyers.

Overall, it doesn’t seem like a good time to compete against the majority and create a perfect environment for old coins to reach new peaks.

The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every investment and trade movement carries risks. You have to do your own research when making a decision.

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