The Bitcoin (BTC), chart has shown a tight range in price movements since May 10. It has also failed to break the $32,000 resistance multiple times.
Coinbase: 12-hour BTC/USD price Source: TradingView
Partly, the choppy trading is due to the uncertainty in the stock market. The S&P 500 Index fluctuated between 3,900 and 4,180 during the same period. There has been some economic growth in the Eurozone, where the gross domestic product grew 5.1% annually. The other side of the coin is inflation, which has risen to 9% in the United Kingdom.
The U.S. Senate introduced the digital assets regulatory framework proposal on June 7, further increasing Bitcoin’s volatility. The bipartisan bill, which is a 69-page long, was supported by Senator Cynthia Lummis from Wyoming and Senator Kirsten Gilibrand from New York. It addresses the CFTC’s authority over digital asset spot markets.
The South Korean Financial Supervisory Service (FSS), opened an investigation into 157 payment gateways that deal with digital assets on June 3. Do Kwon was the main figure in the Terra scandal. An investigation by South Korean officials began on May 24.
On June 6, the U.S. Securities and Exchange Commission opened an investigation into Binance Holdings. Binance is the largest crypto exchange by volume and the SEC is investigating whether the initial coin offering of the BNB token violated securities laws.
IRA Financial Trust filed a lawsuit on June 6 against Gemini cryptocurrency exchange. It claimed that a February 8th breach caused a $36M loss of crypto assets from customers accounts in Gemini’s custody.
Let’s take a look at Bitcoin’s futures data and see how professional traders, whales included, are positioned.
The derivatives metrics reflect the bearish expectations of investors
To understand the position of professional traders, traders should analyze Bitcoin futures market data. To avoid fluctuating funding rates in perpetual futures, experienced traders prefer quarterly contracts.
Basis indicators measure the difference between current spot market levels and longer-term futures contracts. To compensate traders who “lock in” the money for up to three months, the annualized Bitcoin futures premium should be between 5% and 10%.
Annualized premium for Bitcoin 3-month futures. Source: Laevitas
Since April 12, Bitcoin’s futures premium was below 4%, a sign of bearish markets. Worse, these professional traders were bullish six months ago, when the metric passed the 10% threshold.
Trader must also examine the Bitcoin options markets to exclude externalities that are not specific to the futures instrument. The 25% delta skew indicates that arbitrage desks and Bitcoin market makers are charging too much for protection.
Options investors are more likely to be able to pump the price, which causes the skew indicator below negative 12 percent in bullish markets. A bear market’s generalized panic causes a positive 12% or greater skew.
Bitcoin 30-day options 25 % delta skew Source: Laevitas
Between June 1 and 7, the 30-day delta skew ranged between 12.5% and 23%. This indicates that options traders are pricing in higher chances of a bearish move. It still shows moderate sentiment improvement over the past few weeks.
Investor sentiment is clearly being affected by weak economic numbers and cryptocurrency regulation. Derivatives data shows that professional Bitcoin traders avoid leveraged long positions and are unwilling to take down-risk.
It’s evident that bears are content with $32,000 being their resistance level. Repeat drops to $28,200 are likely to follow.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.