Bitcoin bulls aim for $25K price on Friday’s $510M options expiry

August 3, 2022 Coin Telegraph

<div>Bitcoin bulls aim for K price on Friday's 0M options expiry</div>

BTC price has been gaining momentum as it nears $24,000, and this week's options expiry could help bulls profit $200 million.

Fifty-one days have passed since Bitcoin (BTC) last closed above $24,000, causing even the most bullish trader to question whether a sustainable recovery is feasible. However, despite the lackluster price action, bulls have the upper hand on Friday's $510 million BTC options expiry.

*Bitcoin index/USD 1-day price. Source: TradingView*

Investors have been reducing their risk exposure as the Federal Reserve raises interest rates and unwinds its record $8.9 trillion balance sheet. As a result, the Bloomberg Commodity Index (BCOM), which measures price changes in crude oil, natural gas, gold, corn, and lean hogs, has traded down 9% in the same period.

Traders continue to seek protection via U.S. Treasuries and cash positions as San Francisco Fed President Mary Daly said on Aug. 2 that the central bank's fight against inflation is "far from done." With that being said, the tighter monetary impact on inflation, employment levels, and the global economy are yet to be seen.

Bearish bets are mostly below $22,000

Bitcoin's recovery above $22,000 on July 27 took bears by surprise because only 28% of the put (sell) options for Aug. 5 have been placed above such a price level. Meanwhile, Bitcoin bulls may have been fooled by the $24,500 pump on July 30, as 59% of their bets lay above $25,000.

*Bitcoin options aggregate open interest for Aug. 5. Source: CoinGlass*

A broader view using the 1.60 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $315 million against the $195 million put (sell) options. Nevertheless, as Bitcoin currently sits above $23,000, most bearish bets will likely become worthless.

For instance, if Bitcoin's price remains above $23,000 at 8:00 am UTC on Aug. 5, only $19 million worth of these put (sell) options will be available. This difference happens because there is no use in a right to sell Bitcoin at $22,000 or $20,000 if it trades above that level on expiry.

Bulls might pocket a $200 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Aug. 5 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $20,000 and $22,000: 100 calls vs. 3,700 puts. The net result favors bears by $75 million.
Between $22,000 and $24,000: 1,400 calls vs. 1,600 puts. The net result is balanced between call (buy) and put (sell) instruments.
Between $24,000 and $25,000: 3,800 calls vs. 100 puts. The net result favors bulls to $90 million.
Between $25,000 and $26,000: 0 calls vs. 7,900 puts. Bulls extend their gains to $200 million.

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

Bears have less margin required to suppress Bitcoin price

Bitcoin bulls need to push the price above $24,000 on Aug. 5 to secure a $90 million profit. On the other hand, the bears' best-case scenario requires pressure below $22,000 to set their gains at $75 million.

However, Bitcoin bears had $140 million leverage short positions liquidated on July 26-27, according to data from Coinglass. Consequently, they have less margin required to push the price lower in the short term.

The most probable scenario is a draw, causing the Bitcoin price to range between $22,000 and $24,000 ahead of the Aug. 5 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 derivatives show a lack of confidence from bulls

August 2, 2022 Coin Telegraph

Coin Telegraph

High correlation to stock markets and recession risks limit optimism on the part of BTC investors.

Bitcoin (BTC) has been trending up since mid-July, although the current ascending channel formation holds $21,100 support. This pattern has been holding for 45 days and could potentially drive BTC towards $26,000 by late August.

*Bitcoin/USD 12-hour price. Source: TradingView*

According to Bitcoin derivatives data, investors are pricing higher odds of a downturn, but recent improvements in global economic perspective might take the bears by surprise.

The correlation to traditional assets is the main source of investors' distrust, especially when pricing in recession risks and tensions between the United States and China ahead of House Speaker Nancy Pelosi's visit to Taiwan. According to CNBC, Chinese officials threatened to take action if Pelosi moved forward.

The U.S. Federal Reserve's recent interest rate hikes to curb inflation brought further uncertainty for risk assets, limiting crypto price recovery. Investors are betting on a "soft landing," meaning the central bank will be able to gradually revoke its stimulus activities without causing significant unemployment or recession.

The correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.

*S&P 500 and Bitcoin/USD 40-day correlation. Source: TradingView*

As displayed above, the S&P 500 and Bitcoin 40-day correlation currently stands at 0.72, which has been the norm for the past four months.

On-chain analysis corroborates longer-term bear market

Blockchain analytics firm Glassnode's "The Week On Chain" report from Aug. 1 highlighted Bitcoin's weak transaction and the demand for block space resembling the 2018–19 bear market. The analysis suggests a trend-breaking pattern would be required to signal new investor intake:

"Active Addresses [14 days moving average] breaking above 950k would signal an uptick in on-chain activity, suggesting potential market strength and demand recovery."

While blockchain metrics and flows are important, traders should also track how whales and market markers are positioned in the futures and options markets.

Bitcoin derivatives metrics show no signs of “fear” from pro traders

Retail traders usually avoid monthly futures due to their fixed settlement date and price difference from spot markets. On the other hand, arbitrage desks and professional traders opt for monthly contracts due to the lack of a fluctuating funding rate.

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

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

In healthy markets, futures should trade at a 4% to 8% annualized premium, enough to compensate for the risks plus the cost of capital. However, according to the above data, Bitcoin's futures premium has been below 4% since June 1. The reading is not particularly concerning given that BTC is down 52% year-to-date.

To exclude externalities specific to the futures instrument, traders must also analyze Bitcoin options markets. For instance, the 25% delta skew signals when Bitcoin whales and market makers are overcharging for upside or downside protection.

If option investors fear a Bitcoin price crash, the skew indicator would move above 12%. On the other hand, generalized excitement reflects a negative 12% skew.

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

The skew indicator has been below 12% since July 17, considered a neutral area. As a result, options traders are pricing similar risks for both bullish and bearish options. Not even the retest of the $20,750 support on July 26 was enough to instill "fear" in derivatives traders.

Bitcoin derivatives metrics remain neutral despite the rally toward $24,500 on July 30, suggesting that professional traders are not confident in a sustainable uptrend. Thus, data shows that an unexpected move above $25,000 would take professional traders by surprise. Taking a bullish bet might seem contrarian right now, but simultaneously, it creates an interesting risk-reward situation.

Pro traders may use this ‘risk averse’ Ethereum options strategy to play the Merge

July 31, 2022 Coin Telegraph

Coin Telegraph

Ethereum's “Merge” upgrade is expected to induce volatility in ETH price, but options traders can safely remain long by using this strategy.

Ether (ETH) is reaching a make-it or break-it point as the network moves away from proof-of-work (PoW) mining. Unfortunately, many novice traders tend to miss the mark when creating strategies to maximize gains on potential positive developments.

For example, buying ETH derivatives contracts is a cheap and easy mechanism to maximize gains. The perpetual futures are often used to leverage positions, and one can easily increase profits five-fold.

So why not use inverse swaps? The main reason is the threat of forced liquidation. If the price of ETH drops 19% from the entry point, the leveraged buyer loses the entire investment.

The main problem is Ether's volatility and its strong price fluctuations. For example, since July 2021, ETH price crashed 19% from its starting point within 20 days in 118 out of 365 days. This means that any 5x leverage long position will have been forcefully terminated.

How pro traders play the “risk reversal” options strategy

Despite the consensus that crypto derivatives are mainly used for gambling and excessive leverage, these instruments were initially designed for hedging.

Options trading presents opportunities for investors to protect their positions from steep price drops and even profit from increased volatility. These more advanced investment strategies usually involve more than one instrument and are commonly known as "structures."

Investors rely on the "risk reversal" options strategy to hedge losses from unexpected price swings. The holder benefits from being long on the call (buy) options, but the cost for those is covered by selling a put (sell) option. In short, this setup eliminates the risk of ETH trading sideways but it does carry a moderate loss if the asset trades down.

*Profit and loss estimate. Source: Deribit Position Builder*

The above trade focuses exclusively on the Aug. 26 options, but investors will find similar patterns using different maturities. Ether was trading at $1,729 when the pricing took place.

First, the trader needs to buy protection from a downside move by buying 10.2 ETH put (sell) $1,500 options contracts. Then, the trader will sell 9 ETH put (sell) $1,700 options contracts to net the returns above this level. Finally, the trader should buy 10 call (buy) $2,200 options contracts for positive price exposure.

It is important to remember that all options have a set expiry date, so the asset's price appreciation must happen during the defined period.

Investors are protected from a price drop below $1,500

That options structure results in neither a gain nor a loss between $1,700 and $2,200 (up 27%). Thus, the investor is betting that Ether's price on Aug. 26 at 8:00 am UTC will be above that range, gaining exposure to unlimited profits and a maximum 1.185 ETH loss.

If Ether's price rallies toward $2,490 (up 44%), this investment would result in a 1.185 ETH net gain—covering the maximum loss. Moreover, a 56% pump to $2,700 would bring an ETH 1.87 net profit. The main benefit for the holder is the limited downside.

Even though there is no cost associated with this options structure, the exchange will require a margin deposit of up to 1.185 ETH to cover potential losses.

Bitcoin struggles to flip $24K to support, but data shows pro traders stacking sats

July 29, 2022 Coin Telegraph

Bitcoin struggles to flip K to support, but data shows pro traders stacking sats

Coin Telegraph

BTC futures and stablecoin margin data show whales holding steady even as Bitcoin price failed to hold above $24,000.

Bitcoin (BTC) rallied on the back of the United States Federal Reserve's decision to hike interest rates on July 27. Investors interpreted Federal Reserve chairman Jeremy Powell’s statement as more dovish than the previous FOMC committee meeting, suggesting that the worst moment of tight economic policies is behind us.

Another positive news for risk assets came from the U.S. personal consumption expenditures price (PCE) index, which rose 6.8% in June. The move was the biggest since January 1982, reducing incentives for fixed income investments. The Federal Reserve focuses on the PCE due to its broader measure of inflation pressures, measuring the price changes of goods and services consumed by the general public.

Additional positive news came from Amazon after the e-commerce giant reported that its quarterly financial results beat the $119.5 billion estimated revenue by 1.4%. Moreover, Apple released its 2Q results on the same day, matching analyst revenue estimates, while presenting earnings 3.4% above the market consensus.

Top traders have increased their bullish bets

Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.

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

Despite Bitcoin’s 14% correction from July 20 to July 26, top traders on Binance, Huobi and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders’ long-to-short ratio, moving from 1.22 to 1.20.

However, this impact was more than compensated by OKEx traders increasing their bullish bets from 0.66 to 1.17 in six days. The absence of panic selling after Bitcoin failed to break the $24,000 support on July 20 should be interpreted as bullish.

Had buyers been using excessive leverage or distrustful of a potential upside, the price movement would have caused much grea damage to the long-to-short ratio.

Margin traders are unwilling to place bearish bets

Margin trading allows investors to borrow cryptocurrency to leverage their trading position, therefore increasing the returns. For example, one can buy Bitcoin by borrowing Tether (USDT), thus increasing their crypto exposure. On the other hand, borrowing Bitcoin can only be used to short it—betting on the price decrease.

Unlike futures contracts, the balance between margin longs and shorts isn’t necessarily matched. When the margin lending ratio is high, it indicates that the market is bullish—the opposite, a low lending ratio, signals that the market is bearish.

*OKX USDT/BTC margin lending ratio. Source: OKEx*

The chart above shows that investors’ morale bottomed on July 21 as the ratio reached its lowest level in four months at 8.6. From that point onward, OKX traders presented less demand to borrow Bitcoin, exclusively used to bet on the price downtrend. The ratio currently stands at 13.8, which leans bullish in absolute terms as it favors stablecoin borrowing by a wide margin.

Derivatives data shows no stress from pro traders even as Bitcoin traded below $21,000 on July 26. Unlike retail traders, these experienced whales know when to hold on to their conviction and this attitude was clearly reflected in the healthy derivatives data. The data suggests that traders who expect a strong market correction if Bitcoin fails to break the $24,000 resistance will be disappointed.

Bitcoin rallies after Fed interest rate hike, but bears can still win Friday’s $1.76B options expiry

July 28, 2022 Coin Telegraph

Bitcoin rallies after Fed interest rate hike, but bears can still win Friday’s .76B options expiry

Coin Telegraph

BTC bears aim for a $360 million profit in July 29’s $1.76 billion monthly options expiry, but the FOMC interest rate decision could play a decisive factor.

Bitcoin's (BTC) price has been stuck in a descending channel since July 20 and it is currently heading toward the $20,000 support by the end of July. Adding to this bearish price action, BTC is down 50% year-to-date, while U.S. listed tech stocks, as measured by the Nasdaq-100 index, accumulated a 24% loss.

*Bitcoin USD price index, 4-hour. Source: TradingView*

As the U.S. Federal Reserve tightens its economic policies by raising interest rates and scaling back debt asset purchases, risk assets have reacted negatively. Fed chair Jerome Powell is set to wrap up a two-day meeting on July 27 and market analysts expect a nominal 0.75% interest rate hike.

Tensions in Europe escalate as the Russian state-controlled gas company Gazprom is slated to cut supplies to the Nord Stream 1 pipeline starting on July 27. According to CNBC, the company blames a turbine maintenance issue, but European officials think otherwise.

Aiding tech stocks' performance on July 27 was the U.S. Senate approval of the "Chips and Science" bill, which provides $52 billion in subsidies backed by debt and taxes for U.S. semiconductor production. An additional $24 billion of credits for the sector is estimated, aiming to boost the research to compete with China.

For these reasons, traders have mixed feelings about the upcoming Fed announcement and the impact of a global crisis on cryptocurrency markets. As long as Bitcoin's correlation to traditional markets remains high, especially tech stocks, investors will seek protection by moving away from risk-on asset classes such as cryptocurrencies.

Bulls placed their hope on $24,000 and higher

The open interest for the July 29 Bitcoin monthly options expiry is $1.76 billion, but the actual figure will be lower since bulls were caught by surprise as BTC failed to break the $24,000 resistance on July 20.

*Bitcoin options aggregate open interest for July 29. Source: CoinGlass*

The 1.18 call-to-put ratio reflects the $950 million call (buy) open interest against the $810 million put (sell) options. Nevertheless, as Bitcoin stands below $23,000, most of the bullish bets will likely become worthless.

For instance, if Bitcoin's price remains below $23,000 on July 29, bulls will only have $145 million worth of these call (buy) options. This difference happens because there is no use in a right to buy Bitcoin at $23,000 if it trades below that level on July 29 at 8:00 am UTC.

Bears can secure a $360 million profit on Friday

Below are the four most likely scenarios based on the current price action. The number of options contracts available on July 29 for call (buy) and put (sell) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $19,000 and $20,000: 400 calls (buy) vs. 19,300 puts (sell). The net result favors bears by $360 million.
Between $20,000 and $22,000: 3,900 calls (buy) vs. 11,800 puts (sell). Bears have a $230 million advantage.
Between $22,000 and $24,000: 10,300 calls (buy) vs. 8,600 puts (sell). The net result is balanced between bulls and bears.
Between $24,000 and $25,000: 14,400 calls (buy) vs. 7,100 puts (sell). Bulls have a $175 million advantage.

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

Bitcoin bears need to pressure the price below $20,000 on July 29 to secure a $360 million profit. On the other hand, bulls can avoid a loss by pushing BTC above $22,000, balancing the valid bets from both sides. Bulls seem heavily vested to put their losses behind and start August with a clean sheet, but it could still go either way.

CME crypto futures see record activity during bear market

July 28, 2022 Coin Telegraph

bitcoin futures

The trading of Bitcoin and Ether futures on CME remained elevated in the second quarter, with daily open interest hitting all-time highs.

Bitcoin (BTC) and Ether (ETH) derivatives contracts offered by CME Group saw record activity in the second quarter, offering tangible evidence that professional traders were still accessing digital assets during the bear market.

The average daily open interest (OI) across CME’s crypto futures products reached 106,200 contracts in the second quarter, the highest on record, the company disclosed Thursday. In futures markets, OI reflects the total number of derivatives contracts that have not been settled.

In terms of average daily volume, Bitcoin futures saw 10,700 contracts traded in the second quarter; Ether’s daily volume was 6,100 contracts.

During the week of June 21, large open interest holders (LOIH) accessing CME Group’s crypto products reached a high of 404, signaling “growing interest from institutional and large sophisticated investors,” the company said.

Recession or no recession? Bitcoin traders diverge from the Fed as BTC gains. https://t.co/AeLWgl5zbj
— Cointelegraph (@Cointelegraph) July 28, 2022

Despite extreme market volatility for Bitcoin and Ether, CME Group’s crypto futures products have been “a haven of consistent liquidity with continued volume and open interest growth for investors,” Tim McCourt, CME’s global head of equity and FX products, said, adding:

“The variety of products, including the smaller sized micro bitcoin and micro ether futures and options, offers enhanced flexibility and trading precision for a range of market participants, including large institutions as well as sophisticated, active traders.”

In 2017, CME Group became the second derivatives marketplace to offer Bitcoin futures contracts, trailing its cross-town rival CBOE Global Markets by one week. By the end of 2020, CME’s cumulative Bitcoin futures volume reached $100 billion.

The derivatives exchange has since gone on to launch several crypto derivatives products, including micro-sized Bitcoin and Ether options. These contracts are 10% the size of their respective crypto assets, giving traders more opportunities to hedge their exposure.

On Thursday, CME revealed that its Micro BTC product saw an average daily volume of 17,400 contracts in the second quarter. Daily volume for its ETH-equivalent micro contract was 21,300.

$1.26B in Ethereum options expire on Friday and bulls are ready to push ETH price higher

July 28, 2022 Coin Telegraph

Coin Telegraph

Ethereum network developers confirmed September as the date of the upcoming Merge, a move which prompted traders to flip long on ETH.

Ether's (ETH) 53% rally between July 13 and 18 gave bulls an edge in July's $1.26 billion monthly options expiry. The move happened as Ethereum developers set a tentative date for the "Merge," a transition out of the burdensome proof-of-work (PoW) mining mechanism .

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

According to some analysts, by removing the additional ETH issuing used to finance the energy cost required on traditional mining consensus, Ether could finally achieve the "ultra-sound money" status.

On Beacon Chain, the issuance will be around 1,600 ETH per day decreasing the inflation significantly from 13,000 ETH per day on PoW.

Merge sets effects on monetary policies of Ethereum to become Ultrasound money.

(10/15) pic.twitter.com/9hWjhuGpNK
— Akshay Jain (@akshayjain865) July 25, 2022

Whether or not sound monetary policy revolves around constantly changing the issuing and burning rules remains an open question, but there's no doubt that the Ethereum developers' video call on July 14 helped to catapult ETH price.

On July 26, a sudden dramatic spike in Ethereum network active addresses raised multiple speculations about whether Ether is targeting its previous all-time high. Analytics firm Santiment reported that the number of 24-hour daily active addresses reached 1.06 million, breaking the previous 718,000 high set back in 2018. Theories such as "Binance doing a maintenance sweep" emerged, but nothing has been confirmed yet.

The main victims of Ether's impressive 20% recovery on July 27 were leveraged bearish traders (shorts) who faced $335 million in aggregate liquidations at derivatives exchanges, according to data from Coinglass.

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. These traders got too comfortable after ETH stood below $1,300 between June 13 and 16.

The pump above $1,500 on July 27 surprised bears because only 17% of the put (sell) options for July 29 have been placed above that price level.

*Ether options aggregate open interest for July 29. Source: CoinGlass*

The 1.39 call-to-put ratio shows the dominance of the $730 million call (buy) open interest against the $530 million put (sell) options. Nevertheless, as Ether stands near $1,600, most bearish bets will likely become worthless.

If Ether's price remains above $1,500 at 8:00 am UTC on July 29, only $80 million put (sell) options will be available. This difference happens because a right to sell Ether at $1,500 or lower is worthless if Ether trades above that level on expiry.

Bulls are comfortable even below $1,600

Below are the four most likely scenarios based on the current price action. The number of options contracts available on July 29 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $1,400 and $1,500: 120,400 calls vs. 80,400 puts. The net result favors the call (bull) instruments by $60 million.
Between $1,500 and $1,600: 160,500 calls vs. 55,000 puts. The net result favors bulls by $160 million.
Between $1,600 and $1,700: 187,100 calls vs. 43,400 puts. The net result favors the call (bull) instruments by $230 million.
Between $1,700 and $1,800: 220,800 calls vs. 40,000 puts. Bulls' advantage increases to $310 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.

Bears should throw in the towel and focus on the August expiry

Ether bulls need to sustain the price above $1,600 on July 29 to secure a decent $230 million profit. On the other hand, the bears' best case scenario requires a push below $1,500 to reduce the damage to $60 million.

Considering the brutal $330 million leverage short positions liquidated on July 26 and 27, bears should have less margin to pressure ETH price lower. With this said, bulls are better positioned to continue driving ETH higher after the July 29 monthly options expiry.

Ethereum options data show pro traders ready to go long into ETH’s Merge

July 27, 2022 Coin Telegraph

apecoin

ETH price hit resistance at the $1,600 level, but this is not stopping options traders from opening fresh leveraged longs.

Ether (ETH) is down 11.5% in seven days even after the recent confirmation of the "Ethereum merge" transition to a proof-of-stake (PoS) consensus network in September. During the Ethereum core developers conference call on July 14, developer Tim Beiko proposed Sept. 19 as the tentative target date.

The transition out of energy-intensive mining has been delayed for years, and the journey toward scalability using sharding technology — parallel processing capability — is yet to be scheduled. Still, some analysts expect the network’s monetary policy to boost the value of Ether.

Ethereum researcher Vivek Raman highlighted the effect of the "supply shock" and according to the analyst, the "merge" will "reduce ETH's total supply by 90%," even though no benefit in transaction fees is to be seen in the current transition stage.

Regulatory uncertainty could be partially responsible for Ether's recent sharp correction. A class-action has been proposed against Yuga Labs for "inappropriately inducing" the community to buy nonfungible tokens (NFTs) and the ApeCoin (APE) token. Furthermore, the law firm claims that Yuga Labs used celebrity promoters and endorsements to "inflate the price" of the BAYC NFTs and the APE tokens.

Moreover, on July 26, Infrawatch PH, a think tank in the Philippines, filed a complaint to the local regulator to crack down on Binance's activities and alleged unregistered operations . The petition claims that the exchange has no office in Manila and only uses "third-party companies" for its technical and customer support services.

Options traders are nowhere near optimistic

Investors should look at Ether's derivatives markets data to understand how whales and arbitrage desks are positioned. The 25% delta skew is a telling sign whenever traders overcharge for upside or downside protection.

If those market participants feared an Ether price crash, the skew indicator would move above 10%. On the other hand, generalized excitement reflects a negative 10% skew.

*Ether 30-day options 25% delta skew: Source: Laevitas.ch*

The skew indicator exited the "fear" zone on July 16 as Ether broke above $1,300, its highest level in 33 days. However, the improvement in traders' sentiment was not enough to instill confidence as the metric has since remained at the "neutral" threshold. ETH option traders are currently assessing similar upside and downside price movement risks.

Long-to-short data show a modest improvement in sentiment

The top traders' long-to-short net ratio excludes externalities that might have solely impacted the options markets. This metric gathers data from exchange clients' positions on the spot, perpetual and quarterly futures contracts, thus better informing 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 Ether long-to-short ratio. Source: Coinglass*

Even though Ether has failed to break the $1,600 resistance, professional traders did not reduce their leverage long positions between July 19 and 26, according to the long-to-short indicator.

Binance traders long-to-short ratio failed to hold the 1.13 mark but finished the period at the same level it started, near 1.05. Huobi displayed a modest decrease in its long-to-short ratio, as the indicator moved from 1.02 to the current 0.98 in seven days.

However, at the OKX exchange, the metric drastically increased within the period, from 0.88 on July 19 to the present 1.37. Thus, on average, traders increased their bullish positions in seven days.

There hasn't been a significant change in whales and market makers' leverage positions despite Ether's 11.5% correction since July 19. Furthermore, options traders are pricing similar risks for Ether's upside and downside moves, while leverage futures players slightly increased their bullish bets. The overall derivatives metrics reading is positive even though ETH failed to break the $1,600 resistance.

Fed policy and crumbling market sentiment could send the total crypto market cap back under $1T

July 25, 2022 Coin Telegraph

Fed policy and crumbling market sentiment could send the total crypto market cap back under T

Asia

Data shows investors jumping back into fiat and a lack of bullish leverage in the crypto market suggests another correction is in the making.

The total crypto market capitalization broke above $1 trillion on July 18 after an agonizing thirty-five-day stint below the key psychological level. Over the next seven days, Bitcoin (BTC) traded flat near $22,400 and Ether (ETH) faced a 0.5% correction to $1,560.

*Total crypto market cap, USD billion. Source: TradingView*

The total crypto capitalization closed July 24 at $1.03 trillion, a modest 0.5% negative seven-day movement. The apparent stability is biased toward the flat performance of BTC and Ether and the $150 billion value of stablecoins. The broader data hides the fact that seven out of the top-80 coins dropped 9% or more in the period.

Even though the chart shows support at the $1 trillion level, it will take some time until investors regain confidence to invest in cryptocurrencies and actions from the United States Federal Reserve could have the largest impact on price action.

Furthermore, the sit and wait mentality could be a reflection of important macroeconomic events scheduled for the week ahead. Broadly speaking, worse than expected data tends to increase investors' expectations of expansionary measures, which are beneficial for riskier assets like cryptocurrency.

The Federal Reserve policy meeting is scheduled for July 26 and 27, and investors expect the United States central bank to raise interest rates by 75 basis points. Moreover, the second quarter of U.S. gross domestic product (GDP) – the broadest measure of economic activity — will be released on July 27.

$1 trillion not enough to instill confidence

Investors sentiment improved from July 18, as reflected in the Fear and Greed Index, a data-driven sentiment gauge. The indicator currently holds 30 out of 100, which is an increase from 20 on July 18 when it hovered in the "extreme fear" zone.

*Crypto Fear and Greed Index. Source: alternative.me*

One must note that even though the $1 trillion total crypto market capitalization was recaptured, traders' spirits have not improved much. Listed below are the winners and losers from July 17 to 24.

*Weekly winners and losers among the top 80 coins. Source: Nomics*

Arweave (AR) faced a 20.6% technical correction after an impressive 58% rally from July 12–18 after the network file-sharing solution surpassed 80 terabytes (TB) of data storage.

Polygon (MATIC) moved down 11.7% after Ethereum co-founder Vitalik Buterin supported the zero-knowledge Rollups technology implementation, a feature currently in the works for Polygon.

Solana (SOL) corrected 9% after the demand for the smart contract network could be negatively impacted by Ethereum's upcoming migration to a proof-of-stake consensus.

Retail traders are not interested in bullish positions

The OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, Tether's market offer is flooded and causes a 4% or higher discount.

*Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX*

Tether has been trading with a slight discount in Asian peer-to-peer markets since July 4. Not even the 25% total market capitalization rally durinJuly 13–20 was enough to display excessive buying demand from retail traders. For this reason, these investors continued to abandon the crypto market by seeking shelter in fiat currency.

One should analyze crypto derivatives metrics to exclude externalities specific to the stablecoin market. For instance, perpetual contracts have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

*Accumulated perpetual futures funding rate on July 24. Source: Coinglass*

The derivatives contracts show modest demand for leveraged long (bull) positions on Bitcoin, Ether and Cardano. Still, nothing is out of the norm after a 0.15% weekly funding equals a 0.6% monthly cost, so uneventful. The opposite movement happened on Solana, XRP and Ether Classic (ETC), but it is not enough to raise concern.

As investors' attention shifts to global macroeconomic data and the Fed's response to weakening conditions, the window of opportunity for the cryptocurrencies to prove themselves as a solid alternative gets smaller.

Crypto traders are signaling fear and a lack of leverage buying, even in the face of a 67% correction since the November 2021 peak. Overall, derivatives and stablecoin data show a lack of confidence in $1 trillion market capitalization support.

Pro Bitcoin traders are uncomfortable with bullish positions

July 22, 2022 Coin Telegraph

China

BTC derivatives used by whales and market makers do not support a continuous price recovery above $24,000.

The previous $19,000 Bitcoin (BTC) support level becomes more distant after the 22.5% gain in nine days. However, little optimism has been instilled as the impact of the Three Arrows Capital (3AC), Voyager, Babel Finance and Celsius crises remain uncertain. Moreover, the contagion has claimed yet another victim after Thai crypto exchange Zipmex halted withdrawals on July 20.

*Bitcoin/USD 1-day price. Source: TradingView*

Bulls' hopes depend on the $23,000 support strengthening as time goes by, but derivatives metrics show professional traders are still highly skeptical of continuous recovery.

Macroeconomic headwinds favor scarce assets

Some analysts attribute the crypto market strength to China’s lower-than-expected gross domestic product data, causing investors to expect further expansionary measures by policymakers. China’s economy expanded 0.4% in the second quarter versus the previous year, as the country continued to struggle with self-imposed restrictions to curb another outbreak of COVID-19 infections, according to CNBC.

The United Kingdom's 9.4% inflation in June marked a 40-year high, and to supposedly aid the population, Chancellor of the Exchequer Nadhim Zahawi announced a $44.5 billion (GBP 37 billion) assistance package for vulnerable families.

Under these circumstances, Bitcoin reversed its downtrend as policymakers scrambled to solve the seemingly impossible problem of slowing economies amid ever-increasing government debt.

However, the cryptocurrency sector faces its own issues, including regulatory uncertainties. For instance, on July 21, the United States Securities and Exchange Commission (SEC) labeled nine tokens as "crypto asset securities," thus not only falling under the regulatory body's purview but liable for having failed to register with it.

Expressly, the SEC referred to Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX, and XYO. The regulator brought charges against a former Coinbase product manager for "insider trading" after they allegedly used non-public information for personal benefit.

Currently, Bitcoin investors face too much uncertainty despite the seemingly helpful macroeconomic backdrop, which should favor scarce assets such as BTC. For this reason, an analysis of derivatives data is valuable in understanding whether investors are pricing higher odds of a downturn.

Pro traders remain skeptical of price recovery

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 contracts' funding rates.

These fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. But this situation is not exclusive to crypto markets, so futures should trade at a 4% to 10% annualized premium in healthy markets.

The Bitcoin's futures premium flirted with the negative area in mid-June, something is typically seen during extremely bearish periods. The mere 1% basis rate, or annualized premium, reflects professional traders' unwillingness to create leverage long (bull) positions. Investors remain skeptical of the price recovery despite the low cost of opening a bullish trade.

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.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%, while the opposite holds true during bullish markets.

The 30-day delta skew peaked at 21% on July 14 as Bitcoin struggled to break the $20,000 resistance. The higher the indicator, the less inclined options traders are to offer downside protection.

More recently, the indicator moved below the 12% threshold, entering a neutral area, and no longer sitting at the levels reflecting extreme aversion. Consequently, options markets currently display a balanced risk assessment between a bull run and another re-test of the $20,000 area.

Some metrics suggest that the Bitcoin cycle bottom is behind us, but until traders have a better view of the regulatory outlook and centralized crypto service providers' liquidity as the Three Arrows Capital crisis unfolds, the odds of breaking above $24,000 remain uncertain.

derivatives

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On-chain analysis corroborates longer-term bear market

Bitcoin derivatives metrics show no signs of “fear” from pro traders

How pro traders play the “risk reversal” options strategy

Investors are protected from a price drop below $1,500

Top traders have increased their bullish bets

Margin traders are unwilling to place bearish bets

Bulls placed their hope on $24,000 and higher

Bears can secure a $360 million profit on Friday

Bears placed their bets below $1,600

Bulls are comfortable even below $1,600

Bears should throw in the towel and focus on the August expiry

Options traders are nowhere near optimistic

Long-to-short data show a modest improvement in sentiment

$1 trillion not enough to instill confidence

Retail traders are not interested in bullish positions

Macroeconomic headwinds favor scarce assets

Pro traders remain skeptical of price recovery

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