Bitcoin Bulls Seek to Turn $30,000 into Support, but Derivatives Data Shows Lack of Trader Confidence

Bitcoin Bulls Seek to Turn ,000 into Support, but Derivatives Data Shows Lack of Trader Confidence

Bitcoin (BTC) bounced 19% from the low of $25,400 on May 12, but has investor confidence in the market recovered? Judging by the formation of the ascending channel, the bulls may at least have plans to recapture the $30,000 level in the short term.

BTC/USD 4-hour candlestick chart (Bitstamp). Source: TradingView

Is derivatives data supportive of a recovery to $30,000, or is Bitcoin headed for another leg down after failing to break above $31,000 on May 16?

Bitcoin Price Wobbles on Regulatory Concerns and Terra Chaos

One factor putting pressure on the price of BTC could be the Luna Foundation Guard selling 80,081 bitcoins, or 99.6% of its position.

On May 16, LFG released the details about the rest of the reserves of the project and, on the one hand, the risk of selling this project has been eliminated, but investors question the stability of other stablecoins and their finance applications. decentralized (DeFi).

Recent statements by FTX CEO Sam Bankman-Fried on the environmental and scalability issues of proof-of-work (PoW) mining have further fueled the current negative sentiment. According to Bankman-Fried, the use of proof-of-stake (PoS) consensus is more suitable for making millions of transactions.

On May 14, a local UK newspaper reported the Treasury Department’s intention to regulate stablecoins across Great Britain. According to the Treasury spokesperson, the plan does not involve the legalization of algorithmic stablecoins and instead prefers fully backed 1-to-1 stablecoins.

Although this news may have affected the market sentiment and the price of BTC, let’s take a look at the position of the largest traders in the futures and options markets.

Bitcoin Futures Premium Shows Resistance

The basis indicator measures the difference between long-term futures contracts and current cash market levels. The annualized premium for Bitcoin futures should range between 5% and 10% to compensate traders for “locking up” money for two to three months until contract expiration. Levels below 5% are bearish, while numbers above 10% indicate excessive demand from longs (buyers).

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Bitcoin Bulls Seek to Turn $30,000 into Support, but Derivatives Data Shows Lack of Trader Confidence
3-month Bitcoin futures annualized premium. Source: Laevites

The chart above shows that the Bitcoin basis indicator moved below the 5% neutral threshold on April 6, but there has been no panic after the crash to $25,400 on May 12. This means that the metric is slightly positive.

Although the base indicator points to a bearish sentiment, one must remember that Bitcoin is down 36% year-to-date and is 56% below its all-time high of $69,000.

Options traders are beyond stressed

The 25% slope of the options delta is extremely useful because it shows when Bitcoin arbitrage desks and market makers are overcharging for upside or downside protection.

If option investors fear a drop in Bitcoin price, the slope indicator will move above +10%. On the other hand, a widespread stir reflects a -10% tilt.

Bitcoin Bulls Seek to Turn $30,000 into Support, but Derivatives Data Shows Lack of Trader Confidence
Bitcoin 30-day options delta 25% slope. Source: Laevites

The slope indicator moved above +10% on April 6, entering “fear” levels as option traders scrambled to find protection on the downside. However, the current level of 19% remains extremely bearish and the recent 25.5% was the worst reading ever recorded for the metric.

Although the Bitcoin futures premium was resilient, the indicator shows a lack of interest from leveraged buyers (longs). In short, the BTC options markets remain “stressed” and suggest that professional traders are not confident that the current ascending channel pattern will hold.

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