Bitcoin (BTC), which is currently trading at $67,000, appears to be struggling to retest its Oct. 20 all-time high of $67,000. This is making investors question whether the bullish moment has passed. Even though the price is facing these obstacles, it is still premature to declare the $58,000 support test the beginning of an ascending channel.
Coinbase: Bitcoin price in USD Source: TradingView
The regulatory uncertainty in the United States is one of the main factors that has hampered the rally. Anne Termine, a Bracewell LLP partner in the government enforcement & investigations practice and former chief trial lawyer at the Commodities Futures Trading Commission, stated that there are “no easy answers” and that the agency needs to set clear rules.
Traditional banks are being pushed to offer cryptocurrency products due to increasing adoption. Tinkoff, a major Russian private bank, owns a large online brokerage service. However, the Bank of Russia has withheld such launches.
Coinbase exchange was voted the number one most downloaded app in the United States Apple Store this week. This is quite amazing. This feat is quite impressive, as Coinbase has beaten tech giants such as TikTok and YouTube. Coinbase was first listed in the app store in 2014. It was also the most downloaded app in the U.S. between 2017 and 2021.
Pro traders made a mistake, but they are now bullish
The futures premium, also called the “basis rate”, can be used to determine whether professional traders are bullish or bearish.
This indicator measures the difference in futures prices between longer-term contracts and current spot market prices. Healthy markets are known as contango, which is a 5% to 15% annualized premium.
Participants are demanding more money to hold settlement for a longer time. A red alert is issued when this indicator turns negative or fades, also known as “backwardation.”
Basis rate for 3-month Bitcoin futures. Source: Laevitas.ch
The annualized futures premium fell sharply due to the $58,000 resistance test, which occurred on Oct. 27, causing it to fall to its lowest level in three months. The indicator still recovered well to the current 17% level, which indicates a moderate bullishness.
Analyzing options markets can help confirm that the movement was not specific to that instrument.
The 25% delta skew is a comparison of similar call (buy), and put (sell), options. It will turn positive when fear is present. This is due to protective put options being more expensive than comparable risk options.
If market makers are bullish, the opposite movement is observed. The 25% delta skew indicator will shift to the negative zone. Normally, readings between negative 8 and positive 8 are considered neutral.
Deribit Bitcoin options 25% delta skew. Source: laevitas.ch
Since Sep. 30, the 25% delta skew has been fluctuating in neutral. The most recent bottom was Oct. 25, and it was negative 6%. This is not enough to consider moderate bullishness. Professional traders were not frightened by Bitcoin’s 12.5% decline from $66,600 Oct. 21 to $58,200 Oct. 28.
Although there were no bearish signals from the Bitcoin derivatives markets, bulls should be concerned about the possibility of a descending channel beginning on Oct. 19. If this movement is confirmed, traders can expect $60,000 resistance to the Bitcoin derivatives market by Nov. 12.
Professional traders are not showing any stress signals at the moment, so a correction following a 63% rally over three weeks that culminated in the $67,000 record high on October 20 is not likely to be problematic.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.