Retail traders avoid quarterly futures due to the price difference with spot markets, but professional traders prefer them to prevent fluctuating funding rates. Amid bearish markets, options investors believe the value might fall, raising the bias indicator above 12%, while bullish trends push it below -12.
The price of Bitcoin (BTC) recently underwent a 9% correction that took it down to USD 18,270. Although it quickly recovered above USD 19,000, that level was the lowest in three months. However, derivatives contracts indicate that professional traders held their position, unwilling to suffer losses.
Although it is complicated to determine why the incident occurred, recent statements by US President Joe Biden may have caused concerns about a global war. He said the US forces would defend Taiwan regarding the possibility of an unprecedented Chinese-led attack.
Others mentioned that the Central Bank of China lowered costs on loans on 14-day reverse repurchase agreements from 2.25% to 2.15%. The monetary authority pumps more money to stimulate the economy amid inflationary pressures, thus showing signs of weakness.
The upcoming US Federal Reserve Committee meeting also puts pressure, which may raise interest rates by 0.75%. Meanwhile, central bankers struggle to minimize inflation, contributing to the rise in Treasury returns to 3.70%, the highest level since November 2007.
A look at crypto derivatives data will allow seeing whether professional investors changed their attitude after Bitcoin plummeted below USD 19,000.
BTC Derivatives Metrics during the 9% Drop Reflect No Impact
The price difference between quarterly futures and spot markets usually leads retail traders to avoid the former. However, professional traders prefer those tools as they avoid fluctuating funding rates in perpetual futures contracts.
The indicator should trade at an annualized premium of 4% to 8% in healthy markets to cover associated costs and risks. Since the Bitcoin futures premium has remained below 2%, derivatives traders must have been neutral to the bears.
The shock on September 19th did not significantly influence the indicator, which still stands at 0.5%. This data shows that professional traders are reluctant to add leveraged short positions at current prices.
The analysis of Bitcoin options allows investors to rule out the externalities specific to the futures instrument. The 25% delta bias signals whether market makers and arbitrage desks overload upside or downside protection.
Amid bearish markets, options investors believe the price will likely fall, raising the bias indicator above 12%. Besides, bullish trends usually push it below -12%, a discount in bearish put options.
The 30-day delta bias close to the 12% threshold since September 15th indicated that options traders might offer less downside protection. The negative price movement on September 19th flipped those whales lower, while the indicator is now at 11%.
The Price May Rise, Depending on Macroeconomic and Global Obstacles
Derivatives metrics suggest that analysts partially expected the price of Bitcoin to drop on September 19th. That explains why the support at USD 19,000 rebounded in less than two hours. However, those factors will not be relevant if the US Federal Reserve (Fed) raises interest rates above consensus. Besides, the further drop in stock due to the energy crisis and political tensions will not matter.
At the current bearish market low, traders should constantly examine macroeconomic data and monitor central bank sentiment before locking in a banner. Considering weak demand for long leveraged positions in BTC futures, there is a high probability of Bitcoin experiencing prices below USD 18,000.
By Alexander Salazar
