derivatives

Bitcoin is pinned below $20K as the macro climate stifles hope for a sustainable BTC bull run

BTC bulls have a chance to profit from this week’s $410 million options expiry, but the factors pulling down equities markets reduce the chance of Bitcoin changing its trend.

Bitcoin (BTC) crashed below $19,000 on Sept. 6, driving the price to its lowest level in 80 days. The movement not only completely erased the entirety of the 32% gains accrued from July until Aug. 15, it also wiped out $246 million worth of leverage long (buy) futures contracts.

Bitcoin price is down for the year but it’s important to compare its price action against other assets. Oil prices are currently down 23.5% since July, Palantir Technologies (PLTR) has dropped 36.4% in 30 days and Moderna (MRNA), a pharmaceutical and biotechnology company, is down 30.4% in the same period.

Inflationary pressure and fear of a global recession have driven investors away from riskier assets. By seeking shelter in cash positions, mainly in the dollar itself, this protective movement has caused the U.S. Treasuries’ 5-year yield to reach 3.38%, nearing its highest level in 15 years. By demanding a loftier premium to hold government debt, investors are signaling a lack of confidence in the current inflation controls.

Data released on Sept. 7 shows that China’s exports grew 7.1% in August from a year earlier, after increasing by 18% in July. Furthermore, Germany’s industrial orders data on Sept. 6 showed a 13.6% contraction in July versus the previous year. Thus, until there’s some decoupling from traditional markets, there’s not much hope for a sustainable Bitcoin bull run.

Bears were overly optimistic

The open interest for the Sept. 9 options expiry is $410 million, but the actual figure will be lower since bears became too overconfident. These traders were not expecting $18,700 to hold because their bets targeted $18,500 and below.

Bitcoin options aggregate open interest for Sept. 9. Source: CoinGlass

The 0.77 call-to-put ratio reflects the imbalance between the $180 million call (buy) open interest and the $230 million put (sell) options. Currently, Bitcoin stands near $18,900, meaning most bets from both sides will likely become worthless.

If Bitcoin’s price remains below $20,000 at 8:00 am UTC on Sept. 9, only $13 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $20,000 is useless if BTC trades below that level on expiry.

Bears aim for $18,000 to secure a $90 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Sept. 9 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $17,000 and $18,000: 0 calls vs. 4,300 puts. Bears completely dominate, profiting $130 million.
  • Between $18,000 and $19,000: 0 calls vs. 5,050 puts. The net result favors the put (bear) instruments by $90 million.
  • Between $19,000 and $20,000: 700 calls vs. 1,900 puts. The net result favors the put (bear) instruments by $50 million.
  • Between $20,000 and $21,000: 2,050 calls vs. 2,200 puts. The net result is balanced between bulls and bears.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Related: Bitcoin price hits 10-week low amid ‘painful’ U.S. dollar rally warning

Bulls have until Sept. 9 to ease their pain

Bitcoin bulls need to push the price above $20,000 on Sept. 9 to avoid a potential $130 million loss. On the other hand, the bears’ best-case scenario requires a slight push below $18,000 to maximize their gains.

Bitcoin bulls just had $246 million leverage long positions liquidated in two days, so they might have less margin required to drive the price higher. In other words, bears have a head start to peg BTC below $19,000 ahead of the weekly options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin price falls under $19K as data shows pro traders avoiding leverage longs

BTC nose-dived to its lowest level since July 13, but data shows pro traders remain skeptical of a quick recovery.

An $860 surprise price correction on Sept. 6 took Bitcoin (BTC) from $19,820 to $18,960 in less than two hours. The movement caused $74 million in Bitcoin futures liquidations at derivatives exchanges, the largest in almost three weeks. The current $18,733 level is the lowest since July 13 and marks a 24% correction from the rally to $25,000 on Aug. 15.

Bitcoin/USD 30-min price. Source: TradingView

It is worth highlighting that a 2% pump toward $20,200 happened in the early hours of Sept. 6, but the move was quickly subdued and Bitcoin resumed trading near $19,800 within the hour. Ether’s (ETH) price action was more interesting, gaining 7% in the 48 hours preceding the market correction.

Any conspiracy theories regarding investors changing their position to favor the altcoin can be dismissed as Ether dropped 5.6% on Sept. 6, while Bitcoin’s $860 loss represents a 3.8% change.

The market has been in a bit of a rut since Aug. 27 comments from U.S. Federal Reserve Chair Jerome Powell was followed by a $1.25 trillion loss in U.S. stocks in a single day. At the annual Jackson Hole Economic Symposium, Powell said that larger interest rate hikes were still firmly on the table, causing the S&P 500 to close down 3.4% that day.

Let’s take a look at crypto derivatives data to understand whether investors have been pricing higher odds of a downturn.

Pro traders have been bearish since last week

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the fluctuation of funding rates that often occurs in a perpetual futures contract.

Bitcoin 3-month futures annualized premium. Source: Laevitas

In healthy markets, the indicator should trade at a 4% to 8% annualized premium to cover costs and associated risks. So one can safely say that derivatives traders had been neutral to bearish for the past month because the Bitcoin futures premium remained below 3% the entire time. This data reflects professional traders’ unwillingness to add leveraged long (bull) positions.

One must also analyze the Bitcoin options markets to exclude externalities specific to the futures instrument. For example, the 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

Bitcoin 30-day options 25% delta skew: Source: Laevitas

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%. On the other hand, bullish markets tend to drive the skew indicator below negative 12%, meaning the bearish put options are discounted.

The 30-day delta skew had been above the 12% threshold since Sept 1, signaling options traders were less inclined to offer downside protection. These two derivatives metrics suggest that the Bitcoin price dump on Sept. 6 might have been partially expected, which explains the low impact on liquidations.

In comparison, the $2,500 Bitcoin drop on Aug. 18 caused $210 million worth of leveraged long (buyers) liquidations. Still, the prevailing bearish sentiment does not necessarily translate to adverse price action. Therefore, one should tread carefully when whales and market markers are less inclined to add leverage longs and offer downside protection using options.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Former CFTC commissioner Jill Sommers joins FTX US Derivatives board

The addition of Jill Sommers followed former CFTC commissioner Mark Wetjen becoming FTX US’ head of policy and regulatory strategy in November 2021.

Jill Sommers, who served as a commissioner at the United States Commodity Futures Trading Commission, has joined the board of directors for FTX US Derivatives.

In a Thursday announcement, crypto exchange FTX US’ derivatives arm said Sommers had become its latest board member in a move seeming to increase the company’s regulatory efforts. Sommers served as a CFTC commissioner from 2007 to 2013 under former Presidents Barack Obama and George W. Bush and was the managing director of regulatory affairs for the Chicago Mercantile Exchange.

According to Sommers, FTX US Derivatives aimed to become “the most regulated digital asset exchange in the world.” She said the board would work closely with regulators, suggesting discussions with the CFTC and others within the United States government.

“Adding Jill’s wealth of experience in the derivatives landscape is an invaluable resource for our board as we traverse through the evolving digital asset ecosystem and its integration into the broader financial market structure,” said FTX US Derivatives CEO Zach Dexter.

Sommers’ addition to the board followed former CFTC commissioner Mark Wetjen joining FTX US as the firm’s head of policy and regulatory strategy in November 2021. Wetjen, who served as a commissioner from 2011 to 2015 and acting chair in 2014, has previously supported legislative efforts by the crypto exchange connected to expanding the CFTC’s authority. FTX US has proposed amending its clearing house license to include margined crypto-based products without intermediaries.

Related: FTX and FTX US seek even more funding following acquisitions

Members of Congress have several pieces of legislation that aim to provide regulatory clarity for crypto offerings, whether that means having them fall under the purview of the CFTC or the Securities and Exchange Commission. On Aug. 3, four U.S. lawmakers introduced the Digital Commodities Consumer Protection Act, a bill that proposed expanding the role of the CFTC by requiring crypto firms to adhere to many of the same standards for financial institutions dealing in commodities — registering with the regulator and making certain disclosures on trading practices and risks. 

Bybit expands spot USDC trading pairs as support for stablecoins grows

The crypto derivatives exchange has partnered with Circle to expand its suite of USDC offerings; traders will also have access to auto conversions between the stablecoin and U.S. dollars.

Crypto derivatives exchange Bybit has partnered with stablecoin issuer Circle Internet Financial to expand its suite of spot trading pairs denominated in USD Coin (USDC) — a move the company says will increase retail and institutional access to USDC-settled products. 

Under the partnership agreement, Bybit will expand its USDC spot pairs to include several additional cryptocurrencies and make auto conversions between the United States dollar and USDC available, the company disclosed Wednesday. Bybit said it intends to collaborate with Circle on other initiatives to boost stablecoin and crypto adoption.

Currently, Bybit supports around 35 USDC spot pairs, according to a Circle representative. 

Bybit began offering USDC options and perpetual contracts in April of this year, giving traders more ways to hedge against movements in the spot market. At the time, Bybit CEO Ben Zhou told Cointelegraph that the options rollout was in response to growing user demand. On Wednesday, Zhou said the launch of USDC options had been a success and that Bybit was looking to “further develop our working relationship with Circle.”

In addition to USDC options, Bybit plans to make Ether (ETH) and Solana (SOL) options available to traders soon.

Related: Bitcoin derivatives show a lack of confidence from bulls

Circle’s USDC is the world’s second-largest stablecoin with a market capitalization of $52.3 billion, according to CoinMarketCap. Only Tether’s USDT commands more market penetration with a $67.6 billion market cap.

Circle released a full breakdown of its USDC reserves in July for the period ending June 30, 2022. At the time, about 75.6% of its backing was in short-term U.S. Treasury bills. The remainder of its position was in cash deposits at domestic banks.

Hawkish Fed comments and Bitcoin derivatives data point to further BTC downside

BTC and stocks sold-off after comments from the Federal Reserve re-emphasized the Fed’s commitment to lowering high inflation in the United States.

A $750 pump on Aug. 26 took Bitcoin (BTC) from $21,120 to $21,870 in less than two hours. However, the movement was completely erased after comments from U.S. Federal Reserve Chair Jerome Powell reiterated the bank’s commitment to contain inflation by tightening the economy. Following Powell’s speech, BTC price dropped as low as $20,700. 

Bitcoin/USD 30-min price. Source: TradingView

At Jackson Hole, Powell specifically mentioned that “the historical record cautions strongly against prematurely loosening policy.” Right after those remarks, the U.S. stock market indexes reacted negatively, with the S&P 500 dropping 2.2% within the hour.

On the Bitcoin chart, the affable “Bart candle,” a reference to the shape of Bart Simpson’s head, and a descriptor of BTC’s up and down price action, surfaced. Outside of these unpredictable technical analysis indicators, there are other indicators that pointed to Bitcon’s broader neutral-to-bearish sentiment.

Regulators up the pace on crypto legislation

Newsflow for cryptocurrencies has been negative for quite some time and this is also weighing on investor sentiment. On Aug. 24, the U.S. Federal Deposit Insurance Corporation (FDIC) issued cease and desist letters to five companies for allegedly making false representations about deposit insurance related to cryptocurrencies, including FTX US.

On Aug. 25, India-based crypto exchange CoinSwitch had its premises searched by Anti-Money Laundering agents over alleged violations of forex laws. Launched in India in 2020, CoinSwitch successfully raised capital from Coinbase Ventures, Andreessen Horowitz, Sequoia and Tiger Global.

Lastly, on Aug. 26, the U.S. Securities and Exchange Commission postponed a decision for a Bitcoin spot exchange-traded fund (ETF) by global investment firm VanEck. Even though the approval odds were remote, it reinforced the anti-crypto sentiment from the regulator.

Consequently, crypto investors are faced with lingering uncertainty despite the seemingly helpful inflationary scenario, which should favor supply capped assets. For this reason, analyzing crypto derivatives is essential to understanding whether investors have been pricing higher odds of a downturn.

Pro traders were neutral-to-bearish ahead of the dump

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the perpetual fluctuation of funding rates that often occurs in a contract.

Bitcoin 3-month futures annualized premium. Source: Laevitas

In healthy markets, the indicator should trade at a 4% to 8% annualized premium to cover costs and associated risks. Yet, that has not been the case because the Bitcoin futures premium remained below 1.8% the entire time. This data reflects professional traders’ unwillingness to add leveraged long (bull) positions.

Related: CME Bitcoin futures see record discount amid ‘very bearish sentiment’

One must also analyze the Bitcoin options markets to exclude externalities specific to the futures instrument. For example, the 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

Bitcoin 30-day options 25% delta skew: Source: Laevitas

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%. The 30-day delta skew had been ranging near the neutral-to-bearish threshold since Aug. 22, signaling options traders were less inclined to offer downside protection.

These two derivatives metrics suggest that the Bitcoin price dump on Aug. 26 might have followed the traditional stock market performance, but crypto traders were definitely not expecting a positive move.

Derivatives data leaves no room for bullish interpretations because the sentiment worsened after Powell’s comments and they further indicate weakening market conditions.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Wen moon? Probably not soon: Why Bitcoin traders should make friends with the trend

Recurring bear flags and the Fed’s telegraphed monetary policy are painting a roadmap for BTC’s future price action.

The impact of Federal Reserve policy and Bitcoin’s higher timeframe market structure suggest that BTC price is not yet ready for a trend reversal. 

Bitcoin (BTC) price continues to chop below the $22,000 level and the wider narrative among traders and the mainstream media suggests that a risk-off sentiment is a dominant perspective ahead of this week’s Jackson Hole summit.

Over the three-day symposium, the Federal Reserve is expected to clarify its perspective on inflation, interest rate hikes and the overall health of the United States economy.

In the meantime, traders on Crypto Twitter continue to fantisize about a “Fed pivot” where interest hikes will be curtailed below 0.25 basis points and some form of monetary easing re-emerges, but the likelihood of the Fed adopting a dovish point-of-view in the short-term seems unrealistic, given the central bank’s 2% inflation target.

Regarding Bitcoin’s most recent price action, an old saying among traders is:

“Fade the short-term trend in favor of the long-term trend.”

From a bird’s-eye-view, BTC price is in a clear downtrend with a four-month long stretch of recurring bear flags that continue to see continuation.

Sure, the on-chain data hints that maybe price is at a bottom.

Of course, aggregate volumes and certain on-chain data looking at whale and shrimp BTC addresses may point toward accumulation.

Yeah, the open interest in BTC and Ether continues to reach record highs and this adds fuel to the bullish ETH Merge and ETH proof-of-work hard fork tokens narrative triggering a juicy short squeeze on BTC and ETH.

Any of those things can happen, but beware the narrator of those hopium-infused dreams and remember that the trend is always a good friend that a trader can lean on.

As unpleasant as it might sound, the trend is down. Bitcoin continues to meet resistance at its long-term descending trendline and the price has failed to secure resistance at key moving averages like the 20, 50 and 200-day MA.

BTC/USDT daily chart. Source: Tradingview

Each price drop is simply creating a flag-pole, and the ensuing “consolidation” creates the flag of the bear flag continuation pattern. As the pink boxes on the daily chart shows, BTC price simply trades within a defined range before breaking below it into underlying liquidity shown by the volume profile visible range and liquidity maps.

Essentially, there’s “nothing to see here” until price paints a few daily candles that reflect higher highs, i.e., BTC needs to clear $25,000 and close that volume profile gap in the $25,000 to $29,000 zone.

From there, one would either want to see consolidation within that new higher range, or continuation of a trend reversal where the 20-MA and 50-MA function as support. As mentioned earlier, of course there are a ton of other data points that make a strong case for why the current price range is a buy zone, but what may be true for one trader is not necessarily the case for all.

Some investors can afford to open swing longs here and lower and ride it out because they are flush and that’s part of their plan. Others have a smaller purse and can’t afford the lost opportunity cost of being locked into a red position for months on end. Traders are always encouraged to do their own research, make their own thesis and manage risk in a way that is best for their situation.

Jackson Hole is coming up and the Fed needs to continue rate hikes until inflation and other metrics are under control. Equities markets remain tightly correlated with Bitcoin price, so the tell will be whether or not SPX and DJI continue to steamroll higher, or if future actions from the Federal Reserve begin to put a damper on the recent bullish momentum.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Monthly Ethereum options data suggests $2K will remain an elusive target

On August 26, $1.27 billion in ETH options expire and data signals that the price is likely to stay pinned under $2,000 until the Merge.

Since failing to close above the $2,000 mark, Ether (ETH) price has faced a steep 16.8% correction, but this was not enough to give bears an edge in the August $1.27 billion monthly options expiry.

Ether USD price index, 12-hour chart. Source: TradingView

Currently, there are mixed feelings about the network’s upcoming change to a proof-of-stake (PoS) consensus network and analysts like @DWhitmanBTC believe the potential benefits of PoS do not supersede the absence of a supply cap and multiple changes in the monetary policy over time.

Regardless of the long-term impact, Ether price was positively impacted by the tentative Merge migration date announcement from a July 14 Ethereum developers call. Influencer and technical analyst Crypto Rover said that Ether would “drop so hard on the Merge day,” as a result of traders unwinding their positions.

One thing is for sure, leveraged Ether buyers were not expecting the steep correction on Aug. 18 and data from Coinglass shows the move liquidated $208 million at derivatives exchanges.

Bears placed their bets below $1,600

The open interest for Ether’s July monthly options expiry is $1.27 billion, but the actual figure will be lower since bears were overly-optimistic after ETH traded below $1,600 between Aug. 20 and 22. Breaking above that resistance surprised bears because only 17% of the put (sell) options for Aug. 26 have been placed above that price level.

Ether options aggregate open interest for Aug. 26. Source: Coinglass

The 1.18 call-to-put ratio shows the dominance of the $685 million call (buy) open interest against the $585 million put (sell) options. Nevertheless, as Ether stands near $1,650, most of these bearish bets will become worthless.

If Ether’s price remains above $1,600 at 8:00 am UTC on Aug. 26, only $95 million put (sell) options will be available. This difference happens because a right to sell Ether at $1,600 or lower is worthless if Ether trades above that level on expiry.

Bulls completely dominate the August expiry

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Aug. 26 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $1,500 and $1,600: 108,200 calls vs. 103,900 puts. The net result is balanced between bulls and bears.
  • Between $1,600 and $1,700: 45,900 calls vs. 90,000 puts. The net result favors the call (bull) instruments by $150 million.
  • Between $1,700 and $1,800: 192,700 calls vs. 26,000 puts. Bulls’ advantage increases to $290 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Ether above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Related: Ethereum Merge in trouble? Developers find bugs ahead of the planned update

Bears could avoid a $150 million loss

Ether bulls need to sustain the price above $1,600 on Aug. 26 to secure a $150 million profit. On the other hand, the bears’ best-case scenario requires a push below $1,600 to balance the scales and call it a draw.

Considering the brutal $270 million leverage long (buy) positions liquidated on Aug. 18 and 19, bulls should have less margin to pressure ETH price higher. With that said, bulls are unlikely to have the means to drive ETH above $1,700 ahead of the August monthly options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Options data shows Bitcoin’s short-term uptrend is at risk if BTC falls below $23K

BTC’s $335 million options expiry has become a death trap for bulls, and increased legal action by the SEC and IRS against crypto companies is adding to the sell pressure.

Bitcoin (BTC) briefly broke above $25,000 on Aug. 15, but the excitement lasted less than an hour and was followed by a 5% retrace in the next five hours. The resistance level proved to be tougher than expected but may have given bulls false hope for the upcoming $335 million weekly options expiry.

Investors’ fleeting optimism reverted to a sellers’ market on Aug. 17 after BTC dumped and tested the $23,300 support. The negative move took place hours before the release of the Federal Open Markets Committee (FOMC) minutes from its July meeting. Investors expect some insights on whether the Federal Reserve will continue raising interest rates.

The negative newsflow accelerated on Aug. 16 after a federal court in the United States authorized the U.S. Internal Revenue Service (IRS) to force cryptocurrency broker SFOX to reveal the transactions and identities of customers who are U.S. taxpayers. The same strategy was used to obtain information from Circle, Coinbase and Kraken between 2018 and 2021.

This movement explains why betting on Bitcoin price above $25,000 on Aug. 19 seemed like a sure thing a couple of days ago, and this would have incentivized bullish bets.

Bears didn’t expect BTC to move above $24,000

The open interest for the Aug. 19 options expiry is $335 million, but the actual figure will be lower since bears were overly-optimistic. These traders might have been fooled by the short-lived dump to $22,700 on Aug. 10 because their bets for Aug’s options expiry extend down to $15,000.

Bitcoin options aggregate open interest for Aug. 19. Source: Coinglass

The 1.29 call-to-put ratio shows the difference between the $188 million call (buy) open interest and the $147 million put (sell) options. Currently, Bitcoin stands near $23,300, meaning most bullish bets are likely to become worthless.

If Bitcoin’s price moves below $23,000 at 8:00 am UTC on Aug. 19, only $1 million worth of these call (buy) options will be available. This difference happens because a right to buy Bitcoin at $23,000 is useless if BTC trades below that level on expiry.

There’s still hope for bulls, but $25,000 seems distant

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Aug. 19 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $21,000 and $23,000: 30 calls vs. 2,770 puts. The net result favors the put (bear) instruments by $60 million.
  • Between $23,000 and $25,000: 940 calls vs. 1,360 puts. The net result is balanced between bulls and bears.
  • Between $25,000 and $26,000: 3,330 calls vs. 100 puts. The net result favors the call (bull) instruments by $80 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Related: Former Goldman Sachs banker explains why Wall Street gets Bitcoin wrong

Bears will try to pin Bitcoin below $23,000

Bitcoin bulls need to push the price above $25,000 on Aug. 19 to profit $80 million. On the other hand, the bears’ best case scenario requires pressure below $23,000 to maximize their gains.

Bitcoin bulls just had $144 million in leveraged futures long positions liquidated on Aug. 16, so they should have less margin to drive the price higher. With this said, bears have the upper hand to suppress BTC below $23,000 ahead of the Aug. 19 options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin traders anticipate new yearly lows after BTC’s $25K rejection — Data disagrees

Should traders expect further downside after BTC failed to hold above $25,000?

Bitcoin (BTC) showed weakness on Aug. 15, posting a 5% loss after testing the $25,000 resistance. The move liquidated over $150 million worth of leverage long positions and has led some traders to predict a move back toward the yearly low in the $18,000 range.

The price action coincided with worsening conditions for tech stocks, including Chinese giant Tencent, which is expected to post its first-ever quarterly revenue decline. According to analysts, the Chinese gaming and social media conglomerate is expected to post quarterly earnings around $19.5 billion, which is 4% lower than the previous year.

Moreover, on Aug. 16, Citi investment bank slashed Zoom Video Communications (ZM) recommendation to sell, adding that the stock is “high risk.” Analysts explained that a challenging post-COVID dynamic, plus additional competition from Microsoft Teams, potentially caused a 20% drop in ZM shares.

The overall bearish sentiment continues to plague crypto investors, a movement described by influencer and trader @ChrisBTCbull, who mentioned that a simple rejection at $25,000 caused traders to post sub-$17,000 targets.

Margin traders remain bullish despite the $25,000 rejection

Monitoring margin and options markets provides excellent insights into understanding how professional traders are positioned. For instance, a negative read would happen if whales and market makers reduced their exposure as BTC approached the $25,000 resistance.

Margin trading allows investors to borrow cryptocurrency to leverage their trading position, increasing returns. For example, one can increase exposure by borrowing stablecoins to buy an additional Bitcoin position.

On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

OKX USDT/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio has remained relatively stable near 14 while Bitcoin price jumped 6.3% in two days only to be rejected after hitting the $25,200 resistance.

Furthermore, the metric remains bullish by favoring stablecoin borrowing by a wide margin. As a result, pro traders have been holding their bullish positions, and no additional bearish margin trades emerged as Bitcoin retraced 5.5% on Aug. 16.

Related: Bitcoin miners hodl 27% less BTC after 3 months of major selling

Option markets hold a neutral stance

There’s uncertainty about whether Bitcoin will make another run toward the $25,000 resistance but the 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

The skew indicator will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

Bitcoin 30-day options show 25% delta skew: Source: Laevitas.ch

As displayed above, the 25% delta skew has barely moved since Aug. 11, oscillating between 5% and 7% most of the time. This range is considered neutral because options traders are pricing a similar risk of unexpected pumps or dumps.

If pro traders entered a “fear” sentiment, this metric would have moved above 10%, reflecting a lack of interest in offering downside protection.

Despite the neutral Bitcoin options indicator, the OKX margin lending rate showed whales and market makers maintaining their bullish bets after a 5.5% BTC price decline on Aug. 16. For this reason, investors should expect another retest of the $25,000 resistance as soon as the global macroeconomic conditions improve.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

SBI Group reports investee getting CFTC approval for OTC derivatives trading in US

Under the U.S. Commodity Exchange Act and CFTC regulations, derivatives exchanges must have approval to operate as a Designated Contract Market or a Swap Execution Facility.

The United States subsidiary of electronic trading platform developer Clear Markets has reportedly received approval from the Commodity Futures Trading Commission, or CFTC, to offer over-the-counter crypto derivatives products with physical settlement.

In a Tuesday notice, SBI Holdings — a stakeholder of Clear Markets — said the CFTC had approved the U.S. subsidiary operating a Swap Execution Facility, in which it plans to offer derivatives trading for U.S. dollar and Bitcoin (BTC) pairs. The Japan-based financial services company said its market maker planned to expand its trading partners in the United States following pilot transactions on Clear Markets.

SBI Holdings announced it had acquired a 12% stake in Clear Markets in August 2018, which it planned to increase in the future. At the time, the Japanese firm said the investment was aimed at creating a crypto derivatives trading platform catered toward institutional investors.

Under the Commodity Exchange Act and related CFTC regulations, derivatives exchanges — whether dealing with crypto or other assets — must have approval to operate as a Designated Contract Market or a Swap Execution Facility in the United States. According to the Fiscal Year 2023 budget request released in March, the CFTC was considering expanding its authority over financial products using crypto.

Related: What really goes on at a crypto OTC desk?

In May, a federal court ordered three co-founders of BitMEX to pay $30 million in civil monetary penalties for allegedly violating the CFTC’s conditions. Major investment bank Goldman Sachs has also reportedly been looking into breaking into crypto derivatives products through the U.S. subsidiary of cryptocurrency exchange FTX.

Cointelegraph reached out to the CFTC and Clear Markets, but did not receive a response at the time of publication.