China bans Bitcoin (BTC) … again.
No, we don’t travel through time. On September 24th, the People’s Bank of China (PBoC) released a new package of measures to encourage cross-departmental coordination in combating cryptocurrency activity. The measures were intentional “Shorten payment channels, have relevant websites and mobile applications in accordance with the law”.
Most investors may have missed the monthly expiration of the options for$ 3 billion in BTC and $ 1.5 billion ether (ETH) which took place less than an hour before the cryptocurrency ban was announced. Corresponding “Molly”, a former employee of Bitcoin Magazine, China’s comments are originally posted September 3.
However, if a company wanted to take advantage of the negative price spike, it would have made more sense to post the news before 8:00 a.m. UTC on Friday. For example, the $ 42,000 hedging put was discarded because Deribit’s expiry price was $ 44,873. This option holder had the right to sell Bitcoin for $ 42,000, but it is worthless if BTC expires above that level.
For conspiracy theorists, the Chicago Mercantile Exchange (CME) bitcoin futures expiration is the average price between 14:00 and 15:00 UTC. As a result, the potential open interest of $ 340 million hovered near the $ 42,150 level. In the futures markets, buyers (long) and sellers (short) are always paired, making it virtually impossible to guess which side has the most clout.
Despite the negative price swing of $ 4.00, the total settlements for the leveraged long futures contracts were less than $ 120 million. This data should be of great importance to bears as it suggests that the bulls are not getting overconfident or using extreme leverage.
Professional traders showed some doubts but remained neutral
To analyze how bullish or bearish professional traders are, keep an eye on the futures premium, aka “Basic charge”.
This indicator measures the difference between long-term futures contracts and the current spot market level. In healthy markets, an annualized premium of between 5% and 15% is expected, a situation that is called. is known “Contango”.
This price difference is due to sellers charging more money to keep billing going longer. and a red alert appears when this indicator disappears or goes negative, what is called. is known “Backward movement”.
Watch the annualized futures premium hit its lowest level in two months due to the sharp decline caused by the negative 9% move on September 24th. The current 6% indicator is at the lower end of the “neutral” range and has ended a moderate upward phase that lasted until September 19.
To confirm whether this move was specific to this instrument, one also needs to analyze the options markets.
Options markets confirm that traders are entering the “fear zone”
Deltas 25% Tilt compares similar call and put options. The key figure becomes positive if “fear” prevails, since the protection premium for put options is higher than for call options with a similar risk.
The opposite occurs when market makers are bullish, which causes the 25% tilt indicator of the delta to move into negative territory. Measured values between -8% and + 8% are generally considered to be neutral.
The 25% slope of the delta has been in the neutral zone since July 24th but rose to 10% on September 22nd, suggesting “fear” from options traders. After a brief test of the neutral level of + 8%, today’s Bitcoin price action sent the indicator above + 11%. Again, a level last seen two months ago and very similar to that of the BTC futures markets.
While the Bitcoin derivatives market has shown no signs of declining, today’s drop below $ 41,000 has put professional traders in “fear mode”. As a result, futures traders are reluctant to take leveraged long positions while options markets have a premium for hedging put options.
Unless Bitcoin shows strength over the weekend, bears could benefit from the current investor panic.
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