Bitcoin (BTC) underwent a 9% correction in the early hours of September 19, when the price fell to $18,270. Although the price quickly recovered above $19,000, this level was the lowest price seen in three months. However, professional traders stood their ground and were not inclined to take losses, according to derivatives contracts.
It is very difficult to pinpoint the reason for the collapse, but some say that the interview with the president of the United States, Joe Biden, on CBS’s “60 Minutes” program raised concerns about global war. Responding to whether US forces would defend Taiwan in the event of a Chinese-led invasion, Biden replied: “Yes, if indeed, there was an unprecedented attack.”
Others cite that China’s central bank has lowered the cost of borrowing 14-day reverse repurchase agreements to 2.15% from 2.25%. The monetary authority is showing signs of weakness in current market conditions by injecting more money to stimulate the economy amid inflationary pressure.
There is also pressure from the next meeting of the US Federal Reserve Board on September 21, which is expected to raise interest rates by 0.75%, as central bankers scramble to ease the pressure. inflationary. As a result, 5-year Treasury yields soared to 3.70%, the highest level since November 2007.
Let’s analyze the crypto derivatives data to understand if professional investors changed their position when Bitcoin fell below $19,000.
No impact on BTC derivatives metrics during the 9% drop
Quarterly futures are often avoided by retail traders due to their price difference from spot markets, but they are the instruments of choice for professional traders because they avoid the funding base fluctuation that often occurs in a perpetual futures contract.
The indicator should trade at an annualized premium of between 4% and 8% in healthy markets to cover the associated costs and risks. Therefore, it is safe to say that derivatives traders have been neutral to bearish for the past two weeks, given that the Bitcoin futures premium stayed below 2% the entire time.
And what is more important, the shock of September 19 did not cause any significant impact on the indicator, which stands at 0.5%. This data reflects the unwillingness of professional traders to add leveraged short (bearish) positions at current price levels.
Bitcoin options also need to be analyzed to exclude externalities specific to the futures instrument. For example, the 25% delta slope is a telltale sign when market makers and arbitrage desks are overcharging for upside or downside protection.
In bear markets, option investors place higher odds on a price decline, causing the slope indicator to rise above +12%. On the other hand, uptrends tend to push the bias indicator below -12%, meaning bearish puts are trading at a discount.
The 30-day delta slope had been close to the 12% threshold since September 15, signaling that options traders were less inclined to offer downside protection. The negative price movement on September 19 was not enough for those whales to turn bearish, with the gauge currently sitting at 11%.
The bottom may already be marked, but it depends on macro and global headwinds
Derivatives metrics suggest that the drop in Bitcoin price on September 19 was partially expected, which explains why the $19,000 support was recovered in less than two hours. Still, none of this will matter if the US Federal Reserve raises interest rates higher than expected or if stock markets tumble further due to the energy crisis and political tensions.
Therefore, traders should continually scrutinize the macroeconomic data and watch the attitude of the central banks before attempting to say that the definitive bottom of the current bear market has been established. Currently, the odds of Bitcoin hitting prices below $18,000 remain high, especially considering weak demand for long leveraged BTC futures.
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