Bitcoin bulls were obliterated, but is it time to catch the falling knife?
Bitcoin derivatives show traders’ morale is low, weakening the odds of a 20% rise from the $49,320 BTC bottom.
Bitcoin (BTC) price crashed 19% on Aug. 5, reaching its lowest level in almost six months at $49,320. The sell-off caused the Bitcoin futures premium, considered the best proxy for derivatives traders’ optimism, to hit its lowest levels in three months. Traders are now debating whether Bitcoin prices below $53,000 represent a golden opportunity or if the risk of another drop below $47,000 is too high.
To gauge the impact of the recent price crash, one should begin by analyzing the Bitcoin futures markets. Unlike perpetual contracts, which typically settle every eight hours, BTC monthly futures carry an embedded cost due to their longer settlement period. Sellers generally demand a 5% to 10% annualized premium relative to regular Bitcoin spot markets to compensate for this issue. In summary, premiums below 5% signal pessimism.
The annualized Bitcoin futures premium (basis rate) fell to 5.5% on Aug. 5, its lowest level in three months, a sharp drop from the previous week when the indicator peaked at 12%. More notably, when the futures premium bottomed at 5% on May 2, it followed a 15% weekly Bitcoin price decline from $66,600 to $56,200. In May, Bitcoin’s price rebounded by 13% in the three days following the crash, but the current situation differs significantly.
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Author: Marcel Pechman
