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Bitcoin derivatives data points to traders' $50K BTC price target

Bitcoin bulls expectations of $50,000 and higher remain feasible according to BTC futures and options markets.

Bitcoin (BTC) price continues to trade below its 2023 high, a sign that investors may have underestimated the strength of the $44,000 resistance. Even as BTC price trades below $42,000, it doesn’t necessarily mean that reaching $50,000 and beyond is no longer possible. In fact, quite the opposite seems more likely to occur. Looking at Bitcoin derivatives metrics, it is clear that traders ignored the 6.9% drop and remained optimistic. However, is this optimism enough to justify further gains?

The $127 million liquidation of leveraged long Bitcoin futures on Dec. 11 may seem significant in absolute terms, but it represents less than 1% of the total open interest – the value of all outstanding contracts. Nevertheless, it’s undeniable that the liquidation engine triggered a 7% correction in less than 20 minutes.

On one hand, one could argue that derivatives markets played a crucial role in the recent negative price movement. However, this analysis overlooks the fact that after hitting a low of $40,200 on Dec. 11, Bitcoin’s price increased by 4.2% in the following six trading hours. In essence, the impact of forceful liquidation orders had dissipated long ago, disproving the notion of a crash solely driven by futures markets.

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Bitcoin price hit 2023 high, so why are retail traders waiting on the sidelines?

Bitcoin price keeps going up, but retail traders are not piling in yet. Cointelegraph explores why.

The total market capitalization of the cryptocurrency market surged past $1.55 trillion on Dec. 5, driven by remarkable weekly gains of 14.5% for Bitcoin (BTC) and 11% for Ether (ETH). Notably, this milestone, marking the highest level in 19 months, propelled Bitcoin to become the world’s ninth-largest tradable asset, surpassing Meta’s $814 billion capitalization.

Despite the recent bullish momentum, analysts have observed that retail demand remains relatively stagnant. Some attribute this to the ripple effects of an inflationary environment and decreased interest in credit, given that interest rates continue to hover above 5.25%. While analyst Rajat Soni’s post may have dramatized the situation, the underlying, in essence, holds true.

Numerous United States economic indicators have surged to record highs, including wages, salaries and household net worth. However, analyst Ed Yardeni suggested that the “Santa Claus rally” might have already occurred earlier this year, with the S&P 500 gaining 8.9% in November.

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Bitcoin price rally to $42K driven by spot volumes, not BTC futures liquidations

Bitcoin futures data counters the assumption that BTC’s rally to $42,000 was primarily propelled by shorts liquidations. What is next for BTC?

In the past seven days, Bitcoin (BTC) experienced a whopping 14.5% surge, hitting a 20-month high at $41,130 by Dec.

The impact of the recent liquidations in Bitcoin futures markets

While the Chicago Mercantile Exchange (CME) trades USD-settled contracts for Bitcoin futures, where no physical Bitcoin changes hands, these futures markets undoubtedly play a crucial role in shaping spot prices.

In the same seven-day period, a mere $200 million worth of BTC futures shorts were liquidated, representing only 1% of the total outstanding contracts.

Bitcoin futures aggregate open interest and volume, USD. Source: Coinglass

Even when focusing solely on the CME, which is known for potential trading volume inflation, its daily volume of $2.67 billion should have readily absorbed a $100 million 24-hour liquidation.

One could attempt to gauge the extent of liquidations at different price levels using tape reading techniques.

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Bitcoin bulls ignore recent regulatory FUD by aiming to flip $25K to support

Bitcoin’s upward momentum can continue, according to Asian stablecoin demand and the BTC futures premium.

It might seem like forever ago that Bitcoin (BTC) was trading below $18,000, but in reality, it was 40 days ago. Cryptocurrency traders tend to have a short-term memory, and more importantly, they attribute less importance to negative news during bull runs. A great example of this behavior is BTC’s 15% gain since Feb. 13 despite a steady flow of bad news in the crypto market.

For instance, on Feb. 13, the New York State Department of Financial Services ordered Paxos to “cease minting” the Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. Similarly, Reuters reported on Feb. 16 that a bank account controlled by Binance.US moved over $400 million to the trading firm Merit Peak — which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao.

The regulatory pressure wave continued on Feb. 17 as the United States Securities and Exchange Commission announced a $1.4-million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” regarding EthereumMax (EMAX) tokens on social media.

None of those adverse events were able to break investors’ optimism after weak economic data signaled that the U.S. Federal Reserve has less room to keep raising interest rates. The Philadelphia Fed’s Manufacturing Index displayed a 24% decrease on Feb. 16, and U.S. housing starts increased by 1.31 million versus the previous month, which is softer than the 1.36 million expectation.

Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand remains “modest”

Traders should refer to the USD Coin (USDC) premium to measure the demand for cryptocurrency in Asia. The index measures the difference between China-based peer-to-peer stablecoin trades and the U.S. dollar.

Excessive cryptocurrency buying demand can pressure the indicator above fair value at 104%. On the other hand, the stablecoin’s market offer is flooded during bearish markets, causing a 4% or higher discount.

USDC peer-to-peer vs. USD/CNY. Source: OKX

Currently, the USDC premium stands at 2.7%, which is flat versus the previous week on Feb. 13 and indicates modest demand for stablecoin buying in Asia. However, the positive indicator shows that retail traders were not frightened by the recent newsflow or Bitcoin’s rejection at $25,000.

The futures premium shows bullish momentum

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.

Bitcoin 2-month futures annualized premium. Source: Laevitas

The chart shows bullish momentum, as the Bitcoin futures premium broke above the 4% neutral threshold on Feb. 16. This movement represents a return to a neutral-to-bullish sentiment that prevailed until early February. As a result, it’s clear that pro traders are becoming more comfortable with Bitcoin trading above $24,000.

Related: Hong Kong outlines upcoming crypto licensing regime

The limited impact of regulatory action is a positive sign

While Bitcoin’s 15% price gain since Feb. 13 is encouraging, the regulatory newsflow has been primarily negative. Investors are excited by the U.S. Fed‘s decreased ability to curb the economy and contain inflation. Hence, one can understand how those bearish events could not break cryptocurrency traders’ spirit.

Ultimately, the correlation with the S&P 500 50-day futures remains high at 83%. Correlation stats above 70% indicate that asset classes are moving in tandem, meaning the macroeconomic scenario is likely determining the overall trend.

At the moment, both retail and pro traders are showing signs of confidence, according to the stablecoin premium and BTC futures metrics. Consequently, the odds favor a continuation of the rally because the absence of a price correction typically marks bull markets despite the presence of bearish events, especially regulatory ones.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price clings to $22K as investors digest the recent SEC actions and CPI report

Bitcoin price recaptured the $22,000 level, but pending regulatory action against stablecoins and the Valentine’s Day CPI report are front of mind for many investors.

After 20 days of holding the $22,500 support, Bitcoin (BTC) price finally broke down on Feb. 9. Bullish traders had placed their hope on a sustained rally, but this has been replaced by a tight trading range with resistance at $22,000. 

The downtrend is even more concerning since the S&P 500 is trading near its highest level in six months, yet the wider crypto market continues to correct.

Regulatory pressure, mainly in the United States, can explain Bitcoin’s recent lackluster performance. For starters, on Jan. 9, Kraken exchange reached an agreement with the United States Securities and Exchange Commission (SEC) to stop offering staking services to U.S. clients. The crypto also firm agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.

On Feb. 10, cryptocurrency lending firm Nexo Capital announced that its yield-bearing Earn Interest product for U.S. customers would be shut down in April. Nexo pointed to its $45 million settlement with the SEC and other regulators on Jan. 19 as the reason for the service halting.

U.S. SEC Chairman Gary Gensler issued a warning to crypto companies on Jan. 10 to “come in and follow the law,” explaining that their business models were “rife with conflict” and claimed they needed to “disentangle” bundled products. Gensler said that such companies are required to register with the SEC.

Another blow to crypto market sentiment came on Feb. 13 after Paxos Trust Company announced the termination of its relationship with Binance for the branded U.S. dollar-pegged stablecoin BUSD amid an ongoing probe by New York state regulators.

On Feb. 14, the U.S. will report January’s Consumer Price Index data, which will reveal whether price increases have been subdued after the central bank’s interest rate hikes. Typically, lower inflation rates would be celebrated as they reduce the pressure on the U.S. Federal Reserve to curb the economy. But on the other hand, lower consumer demand is likely to pressure corporate earnings, which could trigger the recessionary environment even further.

Let’s look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand weakens, but there are signs of resilience

An excellent way to measure the overall demand for cryptocurrency in Asia is the USD Coin (USDC) premium, which is the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 104%, and during bearish markets, the stablecoin’s market offer is flooded, causing a 4% or higher discount.

USDC peer-to-peer vs. USD/CNY. Source: OKX

Currently, the USDC premium stands at 2%, down from 3% on Feb. 6, indicating declining demand for stablecoin buying in Asia. However, the indicator remains positive, indicating moderate buying activity from retail traders despite the 6% Bitcoin price decline in the period.

Still, one should monitor BTC futures markets to understand how professional traders are positioned.

The futures premium abandoned the neutral-to-bullish range

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

Bitcoin 3-month futures annualized premium. Source: Laevitas

The three-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.

The chart shows declining momentum as the Bitcoin futures premium broke below the 4% neutral threshold on Feb. 8. This movement represents a return to a neutral-to-bearish sentiment that prevailed until mid-January.

Related: Coinbase CEO invites DC residents over for ice cream and crypto talk

Crypto traders are expecting further pressure from regulators

While Bitcoin’s 9% drop since the failed $24,000 resistance test on Feb. 2 seems discouraging, the overwhelming negative regulatory newsflow has caused professional traders to become risk averse.

At the same time, the traditional market looks for further data before adding bullish positions. For example, investors would rather wait until the U.S. Federal Reserve displays conviction on the end of the interest rate increase movement.

Currently, the odds favor bears as regulatory uncertainty provides a favorable environment for fear, uncertainty and doubt — even if the news is unrelated to Bitcoin and focused on crypto exchanges and stablecoins.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Stablecoin data points to ‘healthy appetite’ from bulls and possible Bitcoin rally to $25K

Bitcoin price continues to press higher this week as demand for stablecoins and a key BTC price metric suggests bulls have a “healthy appetite.”

Bitcoin (BTC) rallied 11% between Jan. 20 and Jan. 21, reaching the $23,000 level and shattering bears’ expectations for a pullback to $20,000. Even more notable is the move brought demand from Asia-based retail investors, according to data from a key stablecoin premium indicator.

Traders should note that the tech-heavy Nasdaq 100 index also gained 5.1% between Jan. 20 and Jan. 23, fueled by investors’ hope in China reopening for business after its COVID-19 lockdowns and weaker-than-expected economic data in the U.S. and the Eurozone.

Another bit of bullish information came on Jan. 20 after U.S. Federal Reserve Governor Christopher Waller reinforced the market expectation of a 25 basis point interest rate increase in February. A handful of heavyweight companies are expected to report their latest quarterly earnings this week to complete the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.

In essence, the central bank is aiming for a “soft landing,“ or a controlled decline of the economy, with fewer job openings and less inflation. However, if companies struggle with their balance sheets due to the increased cost of capital, earnings tend to nosedive and ultimately layoffs will be much higher than anticipated.

On Jan. 23, on-chain analytics firm Glassnode pointed out that long-term Bitcoin investors held losing positions for over a year, so those are likely more resilient to future adverse price movements.

Let’s look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

The Asia-based stablecoin premium nears the FOMO area

The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 103%, and during bearish markets, the stablecoin’s market offer is flooded, causing a 4% or higher discount.

USDC peer-to-peer vs. USD/CNY. Source: OKX

Currently, the USDC premium stands at 103.5%, up from 98.7% on Jan. 19, signaling higher demand for stablecoin buying from Asian investors. The movement coincided with Bitcoin’s 11% daily gain on Jan. 20 and indicates moderate FOMO by retail traders as BTC price approached $23,000.

Pro traders are not particularly excited after the recent gain

The long-to-short metric excludes externalities that might have solely impacted the stablecoin market. It also gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts, thus offering better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

Exchanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass

The first trend one can spot is Huobi and Binance’s top traders being extremely skeptical of the recent rally. Those whales and market makers did not change their long-to-short levels over the last week, meaning they are not confident about buying above $20,500, but they are unwilling to open short (bear) positions.

Interestingly, top traders at OKX reduced their net longs (bull) until Jan. 20 but drastically changed their positions during the latest phase of the bull run. Looking at a longer, three-week time frame, their current 1.05 long-to-short ratio remains lower than the 1.18 seen on Jan. 7.

Related: Bitcoin miners’ worst days may have passed, but a few key hurdles remain

Bears are shy, providing an excellent opportunity for bull runs

The 3.5% stablecoin premium in Asia indicates a higher appetite from retail traders. Additionally, the top traders’ long-to-short indicator shows no demand increase from shorts even as Bitcoin reached its highest level since August.

Furthermore, the $335 million liquidation in short (bear) BTC futures contracts between Jan. 19 and Jan. 20 signals that sellers continue to use excessive leverage, setting up the perfect storm for another leg of the bull run.

Unfortunately, Bitcoin price continues to be heavily dependent on the performance of stock markets. Considering how resilient BTC has been during the uncertainties regarding the bankruptcy of Digital Currency Group’s Genesis Capital, the odds favor a rally toward $24,000 or $25,000.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin derivatives data suggests a BTC price pump above $18K won’t be easy

The BTC futures premium remains a topic of concern, but it appears that traders are starting to price similar risks for the upside and downside.

Traders might rejoice now that Bitcoin price ventured above $17,400, but 27 long days have passed since Bitcoin (BTC) last breached the $17,250 resistance. 

On December 13, after a two-week-long lateral movement, Bitcoin posted a 6.5% rally toward $18,000 and even though the current movement still lacks strength, traders believe that a retest of the $18,250 resistance remains possible.

Bitcoin 12-hour price index, USD. Source: TradingView

To start the week, the S&P 500 index rose to its highest level in 26 days on Jan. 9. Weak economic data had previously fueled investors’ expectation of slower interest rate hikes by the U.S. Federal Reserve and the Jan. 12 Consumer Price Index (CPI) report could lend some credence to this expectation.

On Jan. 6, German retail sales data showed a 5.9% year-on-year contraction took place in November. In the U.S., economic activity in the services sector contracted in December after 30 consecutive months of growth. The Services Purchasing Manager’s Index (PMI) reading was 49.6%, and readings below 50% typically point toward a weakening economy.

Investors anxiously wait for the Consumer Price Index (CPI) release on Jan. 12, which is more likely to dictate whether the Fed will raise interest rates by 25 basis points or 50 in early February. Economists expect the report to show inflation increased by 6.6% in the 12 months to December, so a weaker-than-consensus CPI could further boost markets’ performance.

Still, the impacts of a year-long bear market continue to play out as digital asset manager Osprey Funds reportedly laid off most of its staff during the second half of 2022. The investment company offers crypto products for its accredited investors’ brokerage accounts, including a trust.

Analysts should focus on Bitcoin derivatives to understand if the recent positive price action has finally turned crypto investors’ sentiment positive.

The futures premium shows sentiment is slowly improving

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below such a range, it shows a lack of confidence from leverage buyers — typically, a bearish indicator.

Bitcoin 2-month futures annualized premium. Source: Laevitas.ch

The above chart shows positive momentum for the Bitcoin futures premium, which recovered from a 3% discount on Dec. 30 to the current positive 1%. Although it is still in the neutral-to-bearish area, it represents less pessimism versus Dec. 13, before Bitcoin price pumped to $18,000. However, the demand for leverage longs at $17,000 is shy according to the metric.

Before jumping to conclusions, traders should also analyze Bitcoin’s options markets to exclude externalities specific to the futures instrument.

Cast your vote now!

Options are pricing similar risks for upside and downside

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew indicator below -10%, meaning the bearish put options are discounted.

Bitcoin 60-day options 25% delta skew: Source: Laevitas.ch

The delta skew bottomed at 8% on Jan. 9, signaling that options traders are pricing similar risks for upside and downside. More importantly, the current level is the lowest since Nov. 8, or since the FTX exchange implosion.

Even if there’s no appetite for leverage longs using Bitcoin futures, the whales and market makers trading options are getting more comfortable with $17,000 becoming support.

Although there is no evidence that a pump to $18,250 is in the making, at least traders are less risk-averse, according to derivatives data.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin rebound to $18.4K? BTC price derivatives show strength at key support zone

Miners are in deep trouble due to increased hash rate and energy costs, but pro traders slightly added to their longs despite the recent BTC pullback.

Bitcoin (BTC) price lost 11.3% between Dec. 14 and Dec. 18 after briefly testing the $18,300 resistance.

The move followed a seven-day correction of 8% in the S&P 500 futures after United States Federal Reserve Chair Jerome Powell issued hawkish statements after raising the interest rate on Dec. 14.

Bitcoin price retreats to channel support

Macroeconomic trends have been the main driver of recent movements. For instance, the latest bounce from the five-week-long ascending channel support at $16,400 has been attributed to the Central Bank of Japan’s efforts to contain inflation.

Bitcoin 12-hour price index, USD. Source: TradingView

The Bank of Japan increased the limit on government bond yields on Dec. 20, which are now trading at levels unseen since 2015.

However, not everything has been positive for Bitcoin, as miners have struggled with the hash rate nearing an all-time high and increased energy costs. For example, on Dec. 20, Bitcoin miner Greenidge reached an agreement with its creditor to restructure $74 million worth of debt — although the deal requires the miner to sell nearly 50% of it equipment.

Moreover, publically listed Bitcoin mining company Core Scientific reportedly filed for Chapter 11 bankruptcy on Dec 21. While the company continues to generate positive cash flows, the income is insufficient to cover it operational costs, which involve repaying the lease for its Bitcoin mining equipment.

During these events, Bitcoin has held $16,800, so there are buyers at these levels. But let’s look at crypto derivatives data to understand whether investors have increased their risk appetite for Bitcoin.

Bitcoin futures are back to backwardation

Fixed-month futures contracts usually trade at a slight premium to regular spot markets because sellers demand more money to withhold settlement for longer. Technically known as contango, this situation is not exclusive to crypto assets.

In healthy markets, futures should trade at a 4% to 8% annualized premium, which is enough to compensate for the risks plus the cost of capital.

Bitcoin 2-month futures annualized premium. Source: Laevitas

It becomes clear that the attempts to push the indicator above zero have utterly failed over the past 30 days. The absence of a Bitcoin futures premium indicates higher demand for bearish bets, and the metric worsened from Dec. 14 to Dec. 21.

The current 1.5% discount indicates professional traders’ reluctance to add leveraged long (bull) positions despite being actually paid to do so.

Top traders unwilling to let go of their longs

Still, investors should analyze the long-to-short ratio to exclude externalities that have solely impacted the quarterly contracts’ premium.

The metric gathers data from exchange clients’ positions on spot and perpetual contracts, better informing how professional traders are positioned.

Exchanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass

Even though Bitcoin briefly traded below $16,300 on Dec. 19, professional traders did not reduce their leverage long positions according to the long-to-short indicator. For instance, the Huobi traders’ ratio stabilized at 1.01 between Dec. 16 and Dec. 21.

Similarly, OKX displayed a modest increase in its long-to-short ratio, with the indicator moving from 1.02 to the current 1.04 in five days.

Lastly, the metric slightly increased from 1.05 to 1.07 at Binance, confirming that traders did not become bearish after the ascending channel support was tested.

Strength of $16,800 support is a bullish indicator

Traders cannot ascertain that the absence of a futures premium necessarily translates to bearish price expectations. For instance, the lack of confidence in the exchanges could have driven away potential leverage buyers.

Related: Pantera CEO on the FTX collapse; Blockchain didn’t fail

Moreover, the resilience of the top traders’ long-to-short ratio has shown that whales and market makers did not reduce leverage longs despite the recent price dip.

In essence, Bitcoin’s price movement has been surprisingly positive, considering the negative news flow from miners and the bearish influence of raising interest rates on risk markets.

Therefore, as long as the $16,500 channel support continues to hold, bulls have reason to believe that another shot at the $18,400 upper band limit is viable before year-end.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price broke to the upside, but where are all the leveraged long traders?

BTC price looks to break out of its downtrend, yet pro traders are still unwilling to add leveraged positions.

This week’s Bitcoin (BTC) chart leaves little doubt that the symmetrical triangle pattern is breaking to the upside after constricting the price for nearly 20 days. However, derivatives metrics tell a completely different story because professional traders are unwilling to add leveraged positions and are overcharging for downside protection.

BTC-USD 12-hour price at Kraken. Source: TradingView

Will BTC reverse course even as macroeconomic conditions crumble?

Whether BTC turns the $30,000 to $31,000 level into support depends to some degree on how global markets perform.

The last time U.S. stock markets faced a seven-week consecutive downtrend was over a decade ago. New home sales in the U.S. declined for the fourth straight month, which is also the longest streak since October 2010.

China saw a whopping 20% year-on-year decline for its on-demand services, the worst change on record. According to government data released on May 30, consumer spending for internet services from January to April stood at $17.7 billion.

The value of stock offerings in Europe also hit the worst level in 19 years after rising interest rates, inflation and macroeconomic uncertainties caused investors to seek shelter in cash positions. According to Bloomberg, initial public offerings and follow-on transactions raised a mere $30 billion throughout 2022.

All of the above make it easier to understand the discrepancy between the recent Bitcoin price recovery to $32,300 and weak derivatives data because investors are pricing higher odds of a downturn, primarily driven by worsening global macroeconomic conditions.

Derivatives metrics are neutral-to-bearish

Retail traders usually avoid quarterly futures due to their price difference from spot markets, but they are professional traders’ preferred instrument because they avoid the perpetual contracts fluctuating funding rate.

These fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. This situation is not exclusive to crypto markets. Consequently, futures should trade at a 5% to 12% annualized premium in healthy markets.

Bitcoin 3-month futures’ annualized premium. Source: Laevitas

According to data from Laevitas, Bitcoin’s futures premium has been below 4% since April 12. This reading is typical of bearish markets and it’s worrisome that the metric failed to break above the 5% neutral threshold even as the price moved toward $32,000.

To exclude externalities specific to the futures instrument, traders must also analyze the Bitcoin options markets. The 25% delta skew is optimal as it shows when Bitcoin market makers and arbitrage desks are overcharging for upside or downside protection.

During bearish markets, options investors give higher odds for a price crash, causing the skew indicator to move above 12%. On the other hand, a bull markets’ generalized excitement induces a negative 12% or lower skew.

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

The 30-day delta skew peaked at 25.4% on May 14, the highest-ever record and typical of extremely bearish markets. However, the situation improved on May 30 and 31 as the indicator stabilized at 14%, but it prices in higher odds of a price crash. Still, it shows a moderate sentiment improvement from derivatives traders.

The risks of a global economic slowdown are probably the main reason why Bitcoin options markets are stressed and why the futures premium is still low. The 30-day correlation of BTC versus the S&P 500 index is at 89%, meaning traders have fewer incentives to place bullish bets on cryptocurrencies.

Some metrics suggest that the stock market may have bottomed last week, especially since it’s trading 8.5% above the May 20 intraday low, but weak economic numbers are weighing on investor sentiment. This drives the risk-averse momentum and has a negative impact on cryptocurrency markets.

Until there’s a better definition for traditional finance and the world’s biggest economies, Bitcoin traders should continue to avoid building leveraged long positions and maintain a bearish stance, a feature that is currently reflected in options markets.

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.