Bulls or bears? Both have a fair chance in Friday’s Bitcoin options expiry

July 21, 2022 Coin Telegraph

BTC bulls aim to secure a $235 million profit from Friday’s BTC options expiry, but a downside move below $22,000 could nix this plan.

Bitcoin (BTC) briefly broke above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved more challenging than expected. A positive is that the $24,280 high represents a 28.5% increase from the July 13 swing low at $18,900.

According to Yahoo Finance, on July 19, Bank of America published its latest fund managers survey, and the headline was "I'm so bearish, I'm bullish." The report cited investors' pessimism, expectations of weak corporate earnings and equity allocations at the lowest level since September 2008.

The 4.6% advance on the tech-heavy Nasdaq Composite Index between July 18 and July 20 also provided the necessary hope for bulls to profit from the upcoming July 22 weekly options expiry.

Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin confirmed plans to reestablish the Nord Stream gas pipeline flow after the current maintenance period. However, in the course of the last few months, data shows that Germany has reduced its reliance on Russian gas from 55% to 35% of its demand.

Bears placed their bets at $21,000 or lower

The open interest for the July 22 options expiry is $540 million, but the actual figure will be lower since bears have been caught by surprise. These traders did not expect a 23% rally from July 13 to July 20 because their bets targeted $22,000 and lower.

*Bitcoin options aggregate open interest for July 22. Source: CoinGlass*

The 1.09 call-to-put ratio shows the balance between the $280 million call (buy) open interest and the $260 million put (sell) options. Currently, Bitcoin stands near $23,500, meaning most bearish bets will likely become worthless.

If Bitcoin's price remains above $22,000 at 8:00 am UTC on July 22, only $30 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $22,000 is useless if BTC trades above that level on expiry.

Bears aim for $24,000 to secure a $235 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on July 22 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 $21,000: 900 calls vs. 3,000 puts. The net result favors the put (bear) instruments by $60 million.
Between $21,000 and $22,000: 2,400 calls vs. 3,000 puts. The net result is balanced between bulls and bears.
Between $22,000 and $24,000: 6,600 calls vs. 500 puts. The net result favors the call (bull) instruments by $140 million.
Between $24,000 and $26,000: 9,400 calls vs. 0 puts. Bulls take total control, profiting $235 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.

Bears have until Friday to turn things around

Bitcoin bears need to pressure the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, the bulls' best-case scenario requires a slight push above $24,000 to maximize their gains.

Bitcoin bears just had $222 million leverage long positions liquidated from July 17 to July 20, so they should have less margin required to drive the price higher. In other words, bulls have a head start to sustain BTC above $22,000 ahead of the July 22 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.

DeFi’s downturn deepens, but protocols with revenue and fee sharing could thrive

July 15, 2022 Coin Telegraph

Altcoin Watch

It’s too early to know if DeFi is “dead,” but platforms that share revenue with liquidity providers and token holders could be the ones that survive the bear market.

At the moment, liquidity is hard to come by, but crypto traders and protocols still need inflow and revenue to remain functional.

As the crypto winter drags on, savvy crypto investors have realized that one of the reliable sources of passive income that still exists can be found on protocols that generate revenue and share some of it with their respective communities.

Platforms that earn real yield through useage fees are the obvious winner in the bear market, That mean perpetuals and options as they are profitable bear or bull. Thats why #GMX is hot, #snx fees up massively and #eth is just a no brainer.
— Collingwood.lens (@Fraxima1ist) July 13, 2022

Let's take a look at some of the protocols that continue to thrive in the current down market.

DeFi might be dead, but platforms with revenue will thrive

Data from Token Terminal shows revenue positive platforms are primarily the nonfungible token (NFT) marketplaces like LooksRare and OpenSea.

*Top dapps based on cumulative protocol revenue in the past 180 days. Source: Token Terminal*

Aside from a few select protocols including MetaMask, Decentral Games, Axie Infinity and Ethereum Name Service, the majority of the remaining protocols with the highest revenue are decentralized finance platforms, showing that while DeFi is down, it's not out of the game.

Fee sharing helps to lure liquidity

DeFi protocols and decentralized applications (DApps) that offer fee sharing to token holders and liquidity providers are also revenue positive.

Historical view of crypto/web3 projects that generate fee revenue to their token holders.

Protocol revenue market share leaders in '21:
Q1: MakerDAO
Q2: PancakeSwap
Q3: Axie Infinity
Q4: Ethereum pic.twitter.com/zNRFnss7c4
— Token Terminal (@tokenterminal) January 29, 2022

As the bear market continues to batter prices and eliminate unprofitable and poorly managed platforms, protocols that offer token holders passive income streams have a higher chance of enduring until the next bull market begins.

Synthetix (SNX) makes a comeback

A good example of how fee sharing can help boost a token and DeFi protocol was recently seen with Synthetix (SNX), which made waves when it partnered with Curve Finance to create Curve pools for several of its Synths assets.

Since the cross-chain collaboration was established, the protocol revenue for Synthetix has seen a tremendous increase that coincided with a rise in the price of SNX from $1.56 to its current price at $2.59.

*SNX daily price vs. protocol revenue in the past 180 days. Source: Token Terminal*

The increase in revenue did not go unnoticed by crypto Twitter, which was quick to point out the rapid turnaround for the platform.

$SNX @synthetix_io bypassed @AaveAave in daily fees Also, @SushiSwap @CurveFinance @MakerDAO combined. pic.twitter.com/w1dBVHL2YD
— Wega (@William24931283) July 7, 2022

How it all plays out for Synthetix in the long run, is anyone’s guess. For now, the platform is demonstrating that generating revenue and sharing some of that revenue with token holders is one way to retain market share during a market downturn.

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.

Bitcoin derivatives data suggests bears will pin BTC below $21K leading in Friday’s options expiry

July 14, 2022 Coin Telegraph

Bitcoin derivatives data suggests bears will pin BTC below K leading in Friday’s options expiry

CME

Bitcoin’s failure to break above $22,000 on July 8 opened room for bears to score a $100 million profit in this week’s options expiry.

Most Bitcoin (BTC) traders would rather see a sharp price correction and a subsequent recovery than agonize for multiple months below $24,000. However, BTC has been doing the opposite since June 14 and its most recent struggle is the asset’s failure to break above the $22,000 resistance. For this reason, most traders are holding back their bullish expectations until BTC posts a daily close above $24,000.

Events outside of the crypto market are the primary factor impacting investors' perspectives on digital assets and on July 14, United States Treasury Secretary Janet Yellen warned that inflation is "unacceptably high" and she reinforced the support of the Federal Reserve’s efforts. When questioned about the impact of rising interest rates on the economy, Yellen recognized the risk of a recession.

On the same day, JPMorgan Chase reported a 28% decline in profits versus the previous year despite recording stable revenues. The difference comes chiefly from a $1.1 billion provision for credit losses because of a "modest deterioration" in its economic outlook.

Bitcoin’s correlation to the S&P 500 remains incredibly high and investors fear that a potential crisis in the global financial sector will inevitably lead to a retest of the $17,600 low from June 18.

*S&P 500 and Bitcoin/USD 30-day correlation. Source: TradingView*

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.

The S&P 500 and Bitcoin 30-day correlation presently stands at 0.87, which has been the norm for the past four months.

Most bullish bets are above $21,000

Bitcoin's failure to break above $22,000 on July 8 took bulls by surprise because only 2% of the call (buy) options for July 15 have been placed below $20,000. Thus, Bitcoin bears are slightly better positioned for the $250 million weekly options expiry.

*Bitcoin options aggregate open interest for July 15. Source: CoinGlass*

A broader view using the 1.15 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $134 million against the $116 million put (sell) options. Nevertheless, as Bitcoin currently stands below $21,000, most bullish bets will likely become worthless.

If Bitcoin's price remains below $21,000 at 8:00 am UTC on July 15, only $25 million worth of these calls (buy) options will be available. This difference happens because there is no use in the right to buy Bitcoin at $21,000 if it trades below that level on expiry.

Bears could pocket a $100 million profit

Below are the three most likely scenarios based on the current price action. The number

of options contracts available on July 15 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $18,000 and $19,000: 10 calls vs. 5,200 puts. The net result favors bears by $100 million.
Between $19,000 and $20,000: 200 calls vs. 3,400 puts. The net result gives bears a $60 million advantage
Between $20,000 and $21,000: 1,300 calls vs. 1,700 puts. The net result is balanced between bulls and bears.

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.

Futures markets show bears are better positioned

Bitcoin bears need to pressure the price below $19,000 on July 15 in order to secure a $100 million profit. On the other hand, the bulls' best-case scenario requires a push above $20,000 to balance the scales.

The lack of appetite from professional traders in the Bitcoin CME futures indicates that bulls are less inclined to push the price higher in the short term.

With that said, the most probable scenario favors bears, and to secure this Bitcoin price only needs to trade below $21,000 going into the July 15 options expiry.

3 key metrics suggest Bitcoin and the wider crypto market have further to fall

July 12, 2022 Coin Telegraph

Aave

Traders are not as fearful as they were in June, but several metrics show the market is still standing on paper-thin support levels.

The total crypto market capitalization has fluctuated in a 17% range in the $840 billion to $980 billion zone for the past 28 days. The price movement is relatively tight considering the extreme uncertainties surrounding the recent market sell-off catalysts and the controversy surrounding Three Arrows Capital.

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

From July 4 to 11, Bitcoin (BTC) gained a modest 1.8% while Ether (ETH) price stood flat. More importantly, the total crypto market is down 50% in just three months, which means traders are giving higher odds of the descending triangle formation breaking below its $840 billion support.

#Bitcoin Bottom scenario :

Since #BTC downtrend from its peak $BTC has farming the same Decending triangle pattern every time, but each triangle is becoming smaller

We might see another breakdown from triangle & 400WMA can be bottom #Crypto #cryptocurrencies #cryptocurrency https://t.co/BsXBAJHa4P pic.twitter.com/oAQ0IX5XgU
— Aditya Siddhartha Roy❁ (@Adityaroypspk) July 7, 2022

Regulation uncertainties continue to weigh down investor sentiment after the European Central Bank (ECB) released a report concluding that a lack of regulatory oversight added to the recent downfall of algorithmic stablecoins. As a result, the ECB recommended supervisory and regulatory measures to contain the potential impact of stablecoins in European countries' financial systems.

On July 5, Jon Cunliffe, the deputy governor for financial stability at the Bank of England (BoE) recommended a set of regulations to tackle the cryptocurrency ecosystem risks. Cunliffe called for a regulatory framework similar to traditional finance to shelter investors from unrecoverable losses.

A few mid-cap altcoins rallied and sentiment slightly improved

The bearish sentiment from late June dissipated according to the Fear and Greed Index, a data-driven sentiment gauge. The indicator reached a record low of 6/100 on June 19 but improved to 22/100 on July 11 as investors began to build the confidence in a market cycle bottom.

*Crypto Fear & Greed Index. Source: Alternative.me*

Below are the winners and losers from the past seven days. Notice that a handful of mid-capitalization altcoins rallied 13% or higher even though the total market capitalization increased by 2%.

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

Aave (AAVE) gained 20% as the lending protocol announced plans to launch an algorithmic stablecoin, a proposal that is subject to the community's decentralized autonomous organization .

Polygon (MATIC) rallied 18% after projects formerly running in the Terra (LUNA) — now called Terra Classic (LUNC) — ecosystem started to migrate over to Polygon.

Chiliz (CHZ) hiked 6% after the Socios.com app announced community-related features to boost user engagement and integration with third-party approved developers.

Asia-based flow and derivatives demand is neutral and balanced

The OKX Tether (USDT) premium measures the difference between China-based peer-to-peer trades and the official U.S. dollar currency. Excessive cryptocurrency retail demand pressures the indicator above fair value at 100%. On the other hand, bearish markets likely flood Tether's market offer, causing a 4% or higher discount.

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

Tether has been trading at a 1% or higher discount in Asian peer-to-peer markets since July 4. The indicator failed to display a sentiment improvement on July 8 as the total crypto market capitalization flirted with $980 billion, the highest level in 24 days.

To confirm whether the lack of excitement is confined to the stablecoin flow, one should analyze futures markets. Perpetual contracts, also known as inverse swaps, 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 11. Source: Coinglass*

Perpetual contracts reflected a neutral sentiment as Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) displayed mixed funding rates. Some exchanges presented a slightly negative (bearish) funding rate, but it is far from punitive. The only exception was Polkadot's (DOT) negative 0.35% weekly rate (equal to 1.5% per month), but this is not especially concerning for most traders.

Considering the lack of buying appetite from Asia-based retail markets and the absence of leveraged futures demand, traders can conclude that the market is not comfortable betting that the $840 billion total market cap support level will hold.

2 key Ethereum derivatives metrics suggest that $880 was ETH’s bottom

July 8, 2022 Coin Telegraph

2 key Ethereum derivatives metrics suggest that 0 was ETH’s bottom

Coin Telegraph

Data shows Ethereum options traders are less bearish that before, and margin-based markets recently saw some investors go ultra-long on 491,000 ETH.

Ether (ETH) price is up 16% since July 1 and has outperformed Bitcoin (BTC) in the last 7 days. The move could be partially driven by investors clinging to their hopes that the Ethereum network transition to proof-of-stake (PoS) consensus will be a bullish catalyst.

The next steps for this smart contract involve "the Merge," which was previously known as Eth 2.0. The final trial on the Goerli test network is expected in July before the Ethereum mainnet gets the green light for its upgrade.

Since Terra’s ecosystem collapsed in mid-May, Ethereum’s total value locked (TVL) has increased and the flight-to-quality in the decentralized finance (DeFi) industry largely benefited Ethereum thanks to its robust security and battle-tested applications, including MakerDAO.

*Total value locked by market share. Source: Defi Llama*

Ethereum currently holds a 57% market share of TVL, up from 51% on April 8, according to data from Defi Llama. Despite this gain, the current $35 billion in deposits on the networks' smart contracts seem small compared to the $100 billion seen in December 2021.

Further supporting the decrease in decentralized application use on Ethereum is a drop in the median transfer fees, or gas costs, which currently stand at $1.32. This figure is the lowest since mid-December 2020 when the network's TVL stood at $13 billion. However, one might attribute part of the movement to higher use of layer-2 solutions such as Polygon and Arbitrum.

Options traders flirt with the neutral range

Traders should look at Ether's derivatives markets data to understand how whales and market makers are positioned. In that sense, the 25% delta skew is a telling sign whenever professional traders overcharge for upside or downside protection.

If investors expect Ether price to rally, the skew indicator moves to -12% or lower, reflecting generalized excitement. On the other hand, a skew above 12% shows reluctance to take bearish strategies, typical of bear markets.

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

The skew indicator briefly touched the neutral-to-bearish range on July 7 as Ether completed a 19% rally in four days. But those option traders soon shifted to a more conservative approach, giving higher odds of a market downturn as the skew moved to the current 13% level. In short, the higher the index, the less inclined traders are to price downside risk.

Margin traders have turned extremely bullish

To confirm whether these movements were confined to the specific options instrument, one should analyze the margin markets. Lending allows investors to leverage their positions to buy more cryptocurrency. When those savvy traders open margin longs, their gains (and potential losses) depend on the Ether price increase.

Bitfinex margin traders are known for creating position contracts of 100,000 ETH or higher in a very short time, indicating the participation of whales and large arbitrage desks.

*Bitfinex ETH margin longs. Source: Coinglass*

Interestingly, these margin traders greatly increased their longs since June 13 and the current 491,000 contracts is near its highest level in 8 months. This data shows that these traders are effectively not expecting a disastrous price move below $900.

While there hasn't been a significant shift in pro traders' options risk metrics, margin traders remain bullish and are unwilling to decrease their longs despite the "crypto winter."

If these whales and market makers are convinced that $880 on June 18 was the absolute bottom, traders may begin to believe that the worst leg of the bear market is behind us.

Bitcoin traders expect a ‘generational bottom,’ but BTC derivatives data disagrees

July 7, 2022 Coin Telegraph

3AC

BTC bulls think the bottom is in, but a neutral-to-bearish price formation and the absence of a futures premium contradict their optimism.

A descending triangle pattern has been pressuring Bitcoin (BTC) for the past three weeks and while some traders cite this as a bullish reversal pattern, the $19,000 support remains a crucial level to determine the bulls' fate.

*BTC-USD 12-hour price. Source: TradingView*

Despite the apparent lack of a clear price bottom, Bitcoin derivatives metrics have significantly improved since June 30 and positive news from global asset manager VanEck may have eased traders' sentiment.

On July 5, two retirement funds in the U.S. state of Virginia announced a $35 million commitment to VanEck's cryptocurrency-focused investment fund.

On the same day, a Huobi exchange subsidiary received its money services business (MSB) license from the United States Financial Crimes Enforcement Network (FinCEN). The Seychelles-based company stated that the license creates a foundation for expanding crypto-related business in the United States.

A bit of positive news came out on July 7 as decentralized finance staking and lending platform Celsius Network announced that it had fully repaid its outstanding debt to Maker (MKR) protocol.

Celsius is among several crypto yield platforms on the brink of insolvency after historic losses across multiple positions. Forced sales on leveraged positions by exchanges and decentralized finance (DeFi) applications accelerated the recent cryptocurrency price crash.

Currently, traders face mixed sentiment between possible contagion impacts and their optimism that the $19,000 support is gaining strength. For this reason, analyzing derivatives data is essential to understand whether investors are pricing higher odds of a market downturn.

Bitcoin futures premium flips slightly positive

Retail traders usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. However, the contracts' biggest advantage is the lack of a fluctuating funding rate; hence, the prevalence of arbitrage desks and professional traders.

These fixed-month contracts tend to trade at a slight premium to spot markets as sellers request more money to withhold settlement longer. This situation is technically known as "contango" and is not exclusive to crypto markets. Thus, futures should trade at a 5% to 10% annualized premium in healthy markets.

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

Bitcoin annualized futures' premium went negative on June 28, indicating low demand from leverage buyers. Yet, the bearish structure did not hold for long as the indicator shifted to the positive area on July 4.

Option traders remain skeptical of each price pump

To exclude externalities specific to the Bitcoin futures instrument, traders must also analyze the options markets. For instance, the 25% delta skew shows when arbitrage desks are overcharging for upside or downside protection.

Options traders give higher odds for a price increase during bullish markets, causing the skew indicator to fall below -12%. Meanwhile, a market's generalized fear sentiment induces a 12% or higher positive skew.

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

June 18 marked the highest-ever record 30-day delta skew, typical of extremely bearish markets. Still, the current 16% skew level shows investors' reluctance to provide downside protection, a fact reflected by the overcharging for put options.

Contagion is still a threat that adds pressure across the market

It’s tough to call whether $17,580 was the cycle low, but some traders attribute the movement to Three Arrows Capital's failure to meet its margin calls.

Some traders are calling for a "generational bottom," but there is still a long way before investors flip bullish as Bitcoin remains locked in a descending triangle formation.

3AC got liquidated at the generational bottom, send everything into super cycle with haste
— hentaiavenger66 (@hentaiavenger66) July 6, 2022

From one side, Bitcoin derivatives metrics show modest improvement since June 30. On the other hand, investors remain suspicious of further contagion from such an important venture capital and crypto asset manager.

Sometimes the best trade is to wait for a clearer market structure and avoid leverage at all costs, regardless of your certainty of a cycle bottom.

With the bear market in full throttle, crypto derivatives retain their popularity

July 5, 2022 Coin Telegraph

BingX

"Derivatives provide opportunities to protect their portfolios during times of heightened market volatility," says Emerson Li, brand lead at BingX.

The 2022 cryptocurrency bear market has been the worst on record as most Bitcoin traders are underwater and continue to sell at a loss. In response to the rapid decline of token prices, some investors have fled to safe-haven assets; some have exited the market completely and others have perplexingly turned to the enigmatic market of crypto derivatives.

With regards to this, Cointelegraph spoke to BingX's brand lead Emerson Li. BingX is a Singaporean social-based cryptocurrency exchange known for its leaderboards where users can compete with others for returns on investments as well as share ideas among their followers. The exchange processed around $319 million in trading volume within the past 24 hours, mainly consisting of derivates. Regarding the recent market downturn, here's what Li had to say:

"BingX's users are also proliferating; compared with Q1 2022, Users number increased by 70% in the second quarter, and transaction volumes doubling since this round of slumps. We believe that its demand for derivatives is still increasing because it allows users to profit from falling prices, a feature that other products do not have."

During bear markets, traders can purchase derivatives known as put options to either hedge their positions or speculate that the value of underlying tokens will fall. While this can be done by simply shorting the coin, violent and periodic bear market rallies can lead to theoretically infinite losses on one's short position. In addition, a lack of liquidity for borrowing coins to short may lead to exchanges charging high-interest rates on one's positions. On the other hand, the put buyer's losses are theoretically limited to the premium they paid for the derivative, and there are no additional interest fees.

Li went on to explain that BingX is also seeing a sharp increase in deposits as of late. "Since high market volatility is suitable for the derivatives market, we see more users participating in such transactions and stimulating more demand for deposits."

Money also appears to be flowing back to CeFi products from DeFi protocols. "For high-risk products such as DeFi staking, we believe traders have panicked under the recent market, affected by the Terra (LUNA) — since renamed Terra Classic (LUNC) — affair and the problems with many DeFi protocols. Users' risk appetite has decreased, and demand has declined," said Li.

Indeed, dYdX, a decentralized crypto exchange known for its margin and perpetual contract products, saw its weekly trading volume fall approximately 90% from the $12.5 billion witnessed from Oct 24 to Oct 30 last year. However, the trading volume is still several magnitudes higher than one year ago, partly due to the aforementioned risk-hedging tailwind.

Risk-wise, it would appear that the worst is over as a spike in liquidations on dYdX, mainly in the Ethereum and Bitcoin markets, has dissipated since mid-June. Experts from Glassnode noted tokens held in wallet addresses by both new investors and crypto whales had been increasing meaningfully amid the sell-off.

Bitcoin’s short-term price prospects slightly improved, but most traders are far from optimistic

June 27, 2022 Coin Telegraph

China

Bitcoin’s derivatives metrics reflect slight improvements since the $17,600 low, but whales and market makers continue to price higher risk of another breakdown.

A mild sense of hope emerged among Bitcoin (BTC) investors after the June 18 drop to $17,600 becomes more distant and an early ascending pattern points toward $21,000 in the short-term.

*Bitcoin 12-hour USD price at FTX. Source: TradingView*

Recent negative remarks from lawmakers continued to curb investor optimism. In an interview with Cointelegraph, Swiss National Bank (SNB) deputy head Thomas Muser said that the decentralized finance (DeFi) ecosystem would cease to exist if current financial regulations are implemented in the crypto industry.

An article published in The People's Daily on June 26 mentioned the Terra (LUNA), now renamed Terra Classic (LUNC), network's collapse and local blockchain expert Yifan He referring to crypto as a Ponzi scheme. When asked by Cointelegraph to clarify the statement on June 27, Yifan He stated that "all unregulated cryptocurrencies including Bitcoin are Ponzi schemes based on my understanding."

On June 24, Sopnendu Mohanty the chief fintech officer of the Monetary Authority of Singapore (MAS) pledged to be "brutal and unrelentingly hard" on any "bad behavior" from the cryptocurrency industry.

Ultimately, Bitcoin investors face mixed sentiment as some think the bottom is in and $20,000 is support. Meanwhile, others fear the impact that a global recession could have on risk assets. For this reason, traders should analyze derivatives markets data to understand if traders are pricing higher odds of a downturn.

Bitcoin futures show a balanced force between buyers and sellers

Retail traders usually avoid monthly futures because their price differs from regular spot markets at Coinbase, Bitstamp and Kraken. Still, those are professional traders' preferred instruments as they avoid the funding rate fluctuation of the perpetual contracts.

These fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. Consequently, futures should trade at a 5% to 10% annualized premium in healthy markets. One should note that this feature is not exclusive to crypto markets.

Whenever this indicator fades or turns negative, this is an alarming, bearish red flag signaling a situation known as backwardation. The fact that the average premium barely touched the negative area while Bitcoin traded down to $17,600 is remarkable.

Despite currently holding an extremely low futures premium (basis rate), the market has kept a balanced demand between leverage buyers and sellers.

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

During bearish markets, options investors give higher odds for a price crash, causing the skew indicator to rise above 12%. On the other hand, a market's generalized FOMO induces a negative 12% skew.

After peaking at 36% on June 18, the highest-ever record, the indicator receded to the current 15%. Options markets have shown an extreme risk-aversion until June 25, when the 25% delta skew finally broke below 18%.

The current 25% skew indicator continues to display higher risks of a downside from professional traders but it no longer sits at levels that reflecti extreme risk aversion.

The bottom could be in according to on-chain data

Some metrics suggest that Bitcoin may have bottomed on June 18 after miners sold significant quantities of BTC. According to Cointelegraph, this indicates that capitulation has occurred already and Glassnode, an on-chain analysis firm, demonstrated that the Bitcoin Mayer Multiple fell below 0.5, which is extremely rare and hasn't happened since 2015.

Whales and arbitrage desks might take some time to adjust after key players like Three Arrows Capital face serious contraction and liquidation risks due to a lack of liquidity or excessive leverage. Until there's enough evidence that the contagion risk is alleviated, Bitcoin price probably continue to trade below $22,000.

Leading US Crypto Exchange Coinbase To Offer Bitcoin Futures Product on New Derivatives Exchange

June 24, 2022 The Daily Hodl

Here’s how pro traders could use Bitcoin options to buy the $20K BTC dip

June 24, 2022 Coin Telegraph

Here’s how pro traders could use Bitcoin options to buy the K BTC dip

Babel Finance

Predicting a market bottom is pretty much impossible, but clever traders use options strategies like the Iron Condor setup to target a particular trading price range.

Bitcoin hit a 2022 low at $17,580 on June 18 and many traders are hopeful that this was the bottom, but (BTC) has been unable to produce a daily close above $21,000 for the past six days. For this reason, traders are uncomfortable with the current price action and the threat of many CeFi and DeFi companies dealing with the loss of user funds and possible insolvency is weighing on sentiment.

The blowback from venture capital Three Arrows Capital (3AC) failing to meet its financial obligations on June 14 and Asia-based lending platform Babel Finance citing liquidity pressure as a reason for pausing withdrawals are just two of the most recent examples.

This news has caught the eyes of regulators, especially after Celsius, a crypto lending firm, suspended user withdrawals on June 12. On June 16, securities regulators from five states in the United States of America reportedly opened investigations into crypto lending platforms.

There is no way to know when the sentiment will change and trigger a Bitcoin bull run, but for traders who believe BTC will reach $28,000 by August, there is a low-risk options strategy that yields a decent return with limited risk.

The "Iron Condor" provides returns for a specific price range

Sometimes throwing a "hail Mary" pays off by leveraging ten times via futures contracts . However, most traders are looking for ways to maximize gains while limiting losses. For example, the skewed "Iron Condor" maximizes profits near $28,000 by the end of August, but limits losses if the expiry is below $22,000.

*Bitcoin options Iron Condor skewed strategy returns. Source: Deribit Position Builder*

The call option gives its holder the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an upfront fee known as a premium.

Meanwhile, the put option provides its holder the privilege to sell an asset at a fixed price in the future, which is a downside protection strategy. On the other hand, selling this instrument (put) offers exposure to the price upside.

The Iron Condor consists of selling the call and put options at the same expiry price and date. The above example has been set using the August 26 contracts, but it can be adapted for other timeframes.

The target profit area is $23,850 to $35,250

To initiate the trade, the investor needs to short 3.4 contracts of the $26,000 call option and 3.5 contracts of the $26,000 put option. Then, the buyer needs to repeat the procedure for the $30,000 options, using the same expiry month.

Buying 7.9 contracts of the $23,000 put option to protect from an eventual downside is also required. At another purchase of 3.3 contracts of the $38,000 call option to limit losses above the level.

This strategy yields a net gain if Bitcoin trades between $23,850 and $35,250 on August 26. Net profits peak at 0.63 BTC ($13,230 at current prices) between $26,000 and at $30,000, but they remain above 0.28 BTC ($5,880 at current prices) if Bitcoin trades in the $24,750 and $32,700 range.

The investment required to open this strategy is the maximum loss, hence 0.28 BTC or $5,880, which will happen if Bitcoin trades below $23,000 or above $38,000 on August 26. The benefit of this trade is that a reasonable target area is covered, while providing a 125% return versus the potential loss.

derivatives