Coinbase Derivatives Exchange Reveals Nano Bitcoin Futures Product

June 24, 2022 Bitcoin.com

US Congressional hearing on digital asset regulation focuses on disclosure

June 23, 2022 Coin Telegraph

CFTC

An agriculture subcommittee heard a CFTC official, a law professor, a Chainalysis cofounder and Charles Hoskinson air their views on regulation and adjacent topics.

Disclosure was an important theme at a United States House of Representatives hearing on digital asset regulation Thursday. Although chair of the House Agriculture Committee Subcommittee on Commodity Exchanges, Energy and Credit Sean Maloney specified that it would focus on gaps in the oversight and regulation of derivatives and underlying spot markets, the discussion ranged widely.

The Agriculture Committee oversees the Commodity Futures Trading Commission (CFTC), which regulates financial markets along with the Securities and Exchange Commission (SEC).

Chainalysis cofounder and chief strategy officer Jonathan Levin said in his testimony that cryptocurrency’s transparency provides unique insights into the markets, including their risks. The blockchain can unlock information about the entire network behind illicit activities.

Georgetown University law professor Christopher Brummer pointed out that disclosure law assumes issuers have access to information consumer do not have, while blockchain is transparent but hard to understand.

“Disclosures should be read, not just filed,” Brummer said several times in reference to consumer protection, adding that increasing the complexity of disclosure could create vulnerabilities for consumers.

Input Output Global CEO Charles Hoskinson spoke about “mindset” and emphasized the importance of principles and the need to strive for “efficacy over strictness” in the rapidly evolving, global market. He later expressed the opinion that no regulators are doing a good job with Know Your Customer/Anti-Money Laundering safeguards at the moment, however.

As the participants moved on to more specific questions, CFTC market oversight division director Vincent McGonagle said his agency has the expertise to oversee the cash market for crypto. That market is now regulated by state money transmission laws, but there are multiple proposals to grant the CFC authority over it. The state laws have a different purpose from the CFTC’s concerns, McGonagle said, and centralized clearing adds a layer of consumer protection.

Digital assets are defined as commodities, McGonagle said, but the SEC can determine when they are securities. Determining the point at which securities are fully decentralized and no longer subject to SEC oversight is a “tangled web,” McGonagle continued, and there is no legal mechanism for transferring those commodities back to CFTC oversight.

Friday’s $2.25B Bitcoin options expiry might prove that $17.6K wasn’t BTC’s bottom

June 22, 2022 Coin Telegraph

Friday’s .25B Bitcoin options expiry might prove that .6K wasn’t BTC’s bottom

Coin Telegraph

Bulls bet on BTC prices above $60,000 for the June monthly options expiry, and now pro investors are going to pay a hefty price for being wrong.

Bitcoin (BTC) has been trying to break out of a descending trend for the past week and the first attempt on June 16 failed to break the $22,600 resistance. The second attempt at $21,400 on June 21 was followed by an 8% price correction. After two failed breakouts, the price currently trades below $20,000 and raises questions on whether $17,600 was really the bottom.

*Bitcoin/USD 4-hour chart at Coinbase. Source: TradingView*

The longer it takes for BTC to break from this bearish pattern, the stronger the resistance line becomes and traders are following the trend closely. That is precisely why it’s important for bulls to show strength during this week’s $2.25 billion monthly options expiry.

Regulatory uncertainty continues to weigh down on crypto markets after European Central Bank (ECB) president Christine Lagarde voiced her conviction on the necessity of tighter scrutiny. On June 20, Lagarde expressed her thoughts on the sector’s staking and lending activities: "[...] the lack of regulation is often covering fraud, completely illegitimate claims about valuation and very often speculation as well as criminal dealings."

Bitcoin miners being forced to liquidate their BTC holdings is adding more negative pressure to BTC price and data from Arcane Research shows that publicly-listed Bitcoin mining firms sold 100% of their BTC production in May compared to the usual 20% to 40% in previous months. Collectively, miners hold 800,000 BTC, which creates concerns about a possible sell-off. The Bitcoin price correction drained miners' profitability because the production cost has, at times, exceeded their margins.

The June 24 options expiry will be especially alarming for investors because Bitcoin bears are likely to profit by $620 million by suppressing BTC below $20,000.

Bulls placed their bets at $40,000 and higher

The open interest for the June 24 options expiry is $2.25 billion, but the actual figure will be much lower since bulls were overly-optimistic. These traders completely missed the mark after BTC dumped below $28,000 on June 12, but their bullish bets for the monthly options expiry extend beyond $60,000.

*Bitcoin options aggregate open interest for June 24. Source: CoinGlass*

The 1.70 call-to-put ratio shows the dominance of the $1.41 billion call (buy) open interest against the $830 million put (sell) options. Nevertheless, as Bitcoin stands below $20,000, most bullish bets will likely become worthless.

If Bitcoin's price remains below $21,000 at 8:00 am UTC on June 24, only 2% of these call options will be available. This difference happens because a right to buy Bitcoin at $21,000 is worthless if BTC trades below that level on expiry.

Bears have the bulls by the horns

Below are the three most likely scenarios based on the current price action. The number of Bitcoin options contracts available on June 24 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 $20,000: 500 calls vs. 33,100 puts. The net result favors the put (bear) instruments by $620 million.
Between $20,000 and $22,000: 2,800 calls vs. 27,00 puts. The net result favors bears by $520 million.
Between $22,000 and $24,000: 5,900 calls vs. 26,600 puts. The net result favors the put (bear) instruments by $480 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.

A few more dips below $20,000 wouldn’t be suprising

Bitcoin bears need to push the price below $20,000 on June 24 to secure a $620 million profit. On the other hand, the bulls' best case scenario requires a pump above $22,000 to reduce the impact by $140 million.

Bitcoin bulls had $500 million in leveraged long positions liquidated on June 12 and 13, so they should have less margin than is required to drive the price higher. Considering this data, bears have higher odds of pinning BTC below $22,000 ahead of the June 24 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 futures enter backwardation for the first time in a year

June 20, 2022 Coin Telegraph

basis

Risk-averse BTC derivatives traders throw in the towel after futures contracts trade below the spot market price.

Bitcoin's (BTC) month-to-date chart is very bearish, and the sub-$18,000 level seen over the weekend was the lowest price seen since December 2020. Bulls' current hope depends on turning $20,000 to support, but derivatives metrics tell a completely different story as professional traders are still extremely skeptical.

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

It’s important to remember that the S&P 500 index dropped 11% in June, and even multi-billion dollar companies like Netflix, PayPal and Caesars Entertainment have corrected with 71%, 61% and 57% losses, respectively.

The U.S. Federal Open Market Committee raised its benchmark interest rate by 75 basis points on June 15, and Federal Reserve Chairman Jerome Powell hinted that more aggressive tightening could be in store as the monetary authority continues to struggle to curb inflation. However, investors and analysts fear this move will increase the recession risk. According to a Bank of America note to clients issued on June 17:

“Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up.”

Furthermore, according to analysts at global investment bank JPMorgan Chase, the record-high total stablecoin market share within crypto is “pointing to oversold conditions and significant upside for crypto markets from here.” According to the analysts, the lower percentage of stablecoins in the total crypto market capitalization is associated with a limited crypto potential.

Currently, crypto investors face mixed sentiment between recession fears and optimism toward the $20,000 support gaining strength, as stablecoins could eventually flow into Bitcoin and other cryptocurrencies. For this reason, analysis of derivatives data is valuable in understanding whether investors are pricing higher odds of a downturn.

The Bitcoin futures premium turns negative for the first time in a year

Retail traders usually avoid quarterly futures due to their price difference from spot markets, but they are professional traders' preferred instruments because they avoid the perpetual fluctuation of contracts' 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*

Bitcoin's futures premium failed to break above the 5% neutral threshold, while the Bitcoin price firmly held the $29,000 support until June 11. Whenever this indicator fades or turns negative, this is an alarming, bearish red flag signaling a situation is known as backwardation.

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

In bullish markets, options investors give higher odds for a price pump, causing the skew indicator to fall below -12%. On the other hand, a market's generalized panic induces a 12% or higher positive skew.

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

The 30-day delta skew peaked at 36% on June 18, the highest-ever record and typical of extremely bearish markets. Apparently, the 18% Bitcoin price increase since the $17,580 bottom was sufficient enough to reinstall some confidence in derivatives traders. While the 25% skew indicator remains unfavorable for pricing downside risks, at least it no longer sits at the levels which reflect extreme aversion.

Analysts expect “maximum damage” ahead

Some metrics suggest that Bitcoin may have bottomed on June 18, especially since the $20,000 support has gained strength. On the other hand, market analyst Mike Alfred made it clear that, in his opinion, “Bitcoin is not done liquidating large players. They will take it down to a level that will cause the maximum damage to the most overexposed players like Celsius.”

Until traders have a better view of the contagion risk from the Terra ecosystem implosion, the possible insolvency of Celsius and the liquidity issues being faced by Three Arrows Capital, the odds of another Bitcoin price crash are high.

Ethereum price risks a drop below $1K if these key price metrics turn bearish

June 17, 2022 Coin Telegraph

Ethereum price risks a drop below K if these key price metrics turn bearish

Coin Telegraph

Two key Ethereum price metrics have yet to turn bearish, but it won’t take much to trigger an ETH drop below $1,000.

Ether (ETH) price is down 37.5% in the last 7 days and recent news reported that developers decided to postpone the network's migration to a proof-of-stake (PoS) consensus. This upgrade is expected to end the dependency on proof-of-work (PoW) mining and the Merge scalability solution that has been pursued for the past 6 years.

Competing smart contracts like BNB Token (BNB), Cardano (ADA) and Solana (SOL) outperformed Ether by 13% to 17% since June 8 even though there was a market-wide correction in the cryptocurrency sector. This suggests that the Ethereum network's issues also weighed on the ETH price.

The "difficulty bomb," feature was added to the code in 2016 as plans for the new consensus mechanism (formerly Eth2) were being formed. At the peak of the so-called "DeFi summer," Ethereum's average transaction costs surpassed $65 which was frustrating for even the most fervent users. This is precisely why the Merge plays such an important part in investors' eyes and, consequently, Ether price.

Options traders remain extremely risk-averse

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

If traders expected an Ether price crash, the skew indicator would move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. This is precisely why the metric is known as the pro traders' fear and greed metric.

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

The skew indicator improved on June 16, at least for a brief moment, as it touched 19%. However, as soon as it became evident that climbing above the $1,200 resistance would take longer than expected, the skew metric climbed back to 24%. The higher the index, the less inclined traders are to price downside risk.

Long-to-short data show traders are not interested in shorts

The top traders' long-to-short net ratio excludes externalities that might have solely impacted the options markets. By analyzing these positions on the spot, perpetual and quarterly futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

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

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

Even though Ether has failed to sustain the $1,200 support, professional traders did not change their positions between June 14 and June 16, according to the long-to-short indicator.

Binance displayed a modest increase in its long-to-short ratio, as the indicator moved from 1.11 to 1.22 in two days. Thus, those traders slightly increased their bullish bets.

Huobi data shows a stable pattern as the long-to-short indicator stayed near 1.00 the whole time. Lastly, at OKX exchange, the metric oscillated drastically within the period but finished nearly unchanged at 1.04.

Hope for the best, but prepare for the worst

Overall, there hasn't been a significant change in whales' and market makers' futures positions despite Ether's plunge down to $1,012 on June 15. However, options traders fear that a crash below $1,000 remains feasible, but the negative newsflow heavily influences price.

If those whales and market makers had evidence that there could be a deeper price correction, this would have been reflected in the exchanges top traders' long-to-short ratio.

As the saying goes, "follow their actions, not their words", meaning traders should be prepared for sub-$1,000 Ether, but not as the base scenario.

Bitcoin derivatives data shows no ‘bottom’ in sight as traders avoid leveraged long positions

June 13, 2022 Coin Telegraph

Celsius

Is it time to be greedy? Experienced market makers and arbitrage desks have turned strongly risk-averse as BTC price dropped to $22,600.

Bitcoin (BTC) lost the $28,000 support on June 12 following worsening macroeconomic conditions. The United States Treasury 2-year note yield closed on June 10 at 3.10%, its highest level since December 2007. This shows that traders are demanding higher rates to hold their debt instruments and expect inflation to remain a persistent challenge.

Louis S. Barnes, a senior loan officer at Cherry Creek, stated that as the United States reported its highest inflation in 40 years, the mortgage-backed securities (MBS) markets had zero buyers. Barnes added:

"Stocks are down 2% today [June 10], but would be down a hell of a lot more if considering what a full-stop to housing will mean."

MicroStrategy and Celsius leverage use raised alarms

Bitcoin’s sell-off is adding more pressure to the cryptocurrency market and various media are discussing whether the U.S. Nasdaq-listed analytics and business intelligence company MicroStrategy and its $205 million Bitcoin-collateralized loan with Silvergate Bank will add to the current crypto collapse. The interest-only loan was issued on March 29, 2022, and secured by Bitcoin, which is held in a mutually authorized custodian's account.

As stated by Microstrategy's earnings call by chief financial officer Phong Le on May 3, if Bitcoin plummeted to $21,000, an additional amount of margin would be required. However, on May 10, Michael Saylor clarified that the entire 115,109 BTC position could be pledged, reducing the liquidation to $3,562.

Lastly, Crypto staking and lending platform Celsius suspended all network withdrawals on June 13. Speculations of insolvency quickly emerged as the project moved massive amounts of wBTC and Ether (ETH) to avoid liquidation at Aave (AAVE), a popular staking and lending platform.

Just realized people with open borrows at low collateral ratios on Celsius are having to choose between getting liquidated due to market crash or depositing more collateral into a service that has frozen withdrawals and is potentially insolvent.

Woof.
— Nick Neuman (, ) (@Nneuman) June 13, 2022

Celsius reported surpassing $20 billion in assets under management in August 2021, which was ideally more than enough to cause a doomsday scenario. While there is no way to determine how this liquidity crisis will unfold, the event caught Bitcoin's investors at the worst possible moment.

Bitcoin futures metrics are near bearish territory

Bitcoin's futures market premium, the primary derivatives metric, briefly moved to the negative area on June 13. The metric compares longer-term futures contracts and the traditional spot market price.

These fixed-calendar contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlement for longer. As a result, the three-month futures should trade at a 4% to 10% annualized premium in healthy markets, a situation known as contango.

Whenever that indicator fades or turns negative (backwardation), it is an alarming red flag because it indicates that bearish sentiment is present.

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

While the futures premium had already been below the 4% threshold during the past nine weeks, it managed to sustain a moderate premium until June 13. While the current 1% premium might seem optimistic, it is the lowest level since April 30 and sits at the edge of a generalized bearish sentiment.

An unhealthy derivatives market is an ominous sign

Traders should analyze Bitcoin's options pricing to further prove that the crypto market structure has deteriorated. For example, the 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.

The opposite holds when greed is the prevalent mood, which causes the 25% delta skew indicator to shift to the negative area.

*Deribit 30-day Bitcoin options 25% delta skew. Source: laevitas.ch*

Readings between negative 8% and positive 8% are usually deemed neutral, but the 26.6 peak on June 13 was the highest reading ever registered. This aversion to pricing downside risks is unusual even for March 2020, when oil futures plunged to the negative side for the first time in history and Bitcoin crashed below $4,000.

The main message from Bitcoin derivatives markets is that professional traders are unwilling to add leverage long positions despite the extremely low cost. Furthermore, the absurd price gap for put (sell) options pricing shows that the June 13 crash to $22,600 caught experienced arbitrage desks and market markers by surprise.

For those aiming to "buy the dip" or "catch a falling knife," a clear bottom will only be formed once derivatives metrics imply that the market structure has improved. That will require the BTC futures' premium to reestablish the 4% level and options markets to find a more balanced risk assessment as the 25% delta skew returns to 10% or lower.

The total crypto market cap drops under $1.2T, but data show traders are less inclined to sell

June 11, 2022 Coin Telegraph

The total crypto market cap drops under .2T, but data show traders are less inclined to sell

Chainlink

An improving Tether discount in Asian markets and positive futures premiums for BTC and ETH suggest a slight recovery is in the making.

The total crypto market capitalization has been trading in a descending channel for the past 29 days and currently displays support at the $1.17 trillion level. In the past 7 days, Bitcoin (BTC) presented a modest 2% drop and Ether (ETH) faced a 5% correction.

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

The June 10 consumer price index (CPI) report showed an 8.6% year-on-year increase and crypto and stock markets immediately felt the impact, but it’s not certain whether the figure will convince the U.S. Federal Reserve to hesitate in future interest rate hikes.

Mid-cap altcoins dropped further, sentiment is still bearish

The generalized bearish sentiment caused by weak macroeconomic data and uncertainties regarding the Federal Reserve's ability to curb inflation has severely impacted crypto markets.

The Fear and Greed Index hit 11/100 on June 9, and the data-driven sentiment gauge has been below 20 since May 8.

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

This persistent "extreme fear" reading indicates that investors are worried but, at the same time, it supposedly presents a buying opportunity.

Below are the winners and losers from the past seven days. While the two leading cryptocurrencies presented modest losses, a handful of mid-capitalization altcoins declined by 14% or more.

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

Helium’s (HNT) community approved the HIP-51 proposal, covering the economic and technical constructions required to support new users, devices and different types of networks, including cellular, VPN, and WiFi.

Chainlink (LINK) rallied 22% after the developers released a revamped Chainlink 2.0 roadmap, including native token staking.

Theta Token (THETA) gained 9.7% as the network announced livestream support using API technology which enabled instant and easy connection to apps and websites.

WAVES lost 28% after the $1,000 daily withdrawal limit for stablecoins in Vires Finance were implemented to avoid further pressure on the Neutrino Protocol Stablecoin (USDN).

Data shows traders are less inclined to sell at the current levels

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*

On May 31, the Tether price in Asian peer-to-peer markets entered a 4% discount, signaling intense retail selling pressure. Curiously, the situation improved on June 10 after the indicator moved to a 1.5% discount. Despite remaining negative, the metric shows investors' willingness to buy the dip as the total crypto capitalization dropped below $1.2 trillion.

To exclude externalities specific to the Tether instrument, traders must also analyze the cryptos 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 June 10. Source: Coinglass*

Perpetual contracts reflected mixed sentiment after Bitcoin and Ethereum held a slightly positive (bullish) funding rate, but altcoin rates were negative. For example, BNB’s negative 0.20% weekly rate equals 0.8% per month, which is generally not a concern for derivatives traders.

Any recovery depends on macroeconomic data stabilizing

According to derivatives and trading indicators, investors are less inclined to reduce their positions at current levels, as shown by the modest improvement in the Tether premium.

The positive funding rate for Bitcoin and Ether futures displays traders' growing appetite for leveraged long positions as the total crypto capitalization broke below $1.2 trillion.

Unless the traditional markets and macroeconomic scenario deteriorates, there is reason to believe crypto investors are expecting a positive price move soon.

This key Ethereum price metric shows ETH traders aren’t as bearish as they appear

June 9, 2022 Coin Telegraph

Binance

Traders keep saying ETH price will collapse below $1,600 soon, but a key trading metric shows most are unwilling to place bearish bets below $1,900.

Ether (ETH) is down 25% in just a month and even the recent upgrade to a proof-of-stake (PoS) consensus on the Ropsten testnet failed to move the altcoin’s price.

The merge is meant to address energy-use issues and open a path for higher transaction output, but the actual full transition for the Ethereum network is not expected until later in the year. Ethereum developer Parithosh Jayanthi also noted that some bugs on the PoS implementation emerged, but those should be fixed over the coming weeks.

Luckily for Ethereum, two of its top competitors recently faced challenges of their own. The Solana (SOL) network faced the fifth outage in 2022 after no new blocks were produced for four hours on June 1. Every decentralized application was halted until the validators were able to address the problem and re-sync the network.

More recently, Binance’s native BNB token dropped 7% on June 7 after news that the United States Securities and Exchange Commission announced that it had opened an investigation into the initial coin offer (ICO) from 2017. According to Bloomberg, at least one U.S. resident claimed to have taken part in the ICO, which could be crucial for an SEC case.

Regulatory uncertainty could be partially responsible for Ether's sharp correction. On June 6, Hong Kong's Securities and Futures Commission (SFC) released a note warning about the investment risks of nonfungible tokens . The regulatory agency highlighted the sectors' opaque pricing, illiquid markets and frauds.

Options traders are still extremely risk-averse

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

If those traders fear an Ether price crash, the skew indicator will move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. That is precisely why the metric is known as the pro traders' fear and greed metric.

The skew indicator has been above 10% since May 22, and it recently peaked at 20% on June 3. Those levels signal extreme fear from options traders, and despite the modest improvement, the current 17% delta skew shows whales and arbitrage desks unwilling to take downside risk.

Long-to-short data is showing a few positives

The top traders' long-to-short net ratio excludes externalities that might have solely impacted the options markets. By analyzing these top clients' positions on the spot, perpetual and quarterly futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

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

Even though Ether has struggled to sustain $1,800 as a support, professional traders did not change their positions between June 5 and 9, according to the long-to-short indicator.

Binance displayed a modest decrease in its long-to-short ratio, as the indicator moved from 0.99 to the current 0.96 in four days. Thus, those traders slightly net increased their bearish bets.

Huobi data shows a similar pattern and the indicator moved from 1.02 to 0.98 on June 9, which was a small change favoring shorts. At OKX exchange, the metric oscillated drastically within the period but finished nearly unchanged at 1.35.

Mixed derivatives data provides hope for bulls

Overall, there hasn't been a significant change in whales and market makers' leverage positions despite Ether's failure to break the $1,900 resistance on June 6.

From one side, options traders fear that a deeper Ether price correction is likely in the making, but at the same time, futures market players have no conviction to increase bearish bets.

This reading is likely a "glass half full" scenario as the top traders' unwillingness to short below $1,900 can potentially create a support level.

Bitcoin derivatives data forecasts sub-$30K BTC price heading into Friday’s $800M options expiry

June 9, 2022 Coin Telegraph

Bitcoin derivatives data forecasts sub-K BTC price heading into Friday’s 0M options expiry

BitMex

Bulls placed too much hope on $32,000 flipping to support, an error that is bound to show by Friday’s $800 million BTC options expiry.

Bitcoin (BTC) briefly broke above $32,000 on May 31, but the excitement lasted less than four hours after the resistance level proved to be tougher than expected. The $32,300 level represented a 20% increase from the May 12 swing low at $27,000 and it provided the necessary hope for bulls to buy some $34,000 and higher call options.

The fleeting optimism reverted to a sellers' market on June 1 after BTC dumped 7.6% in less than six hours and pinned the price below $30,000. The negative move coincided with the United States Federal Reserve starting the process of scaling down its $9 trillion balance sheet.

On June 2, former BitMEX exchange CEO Arthur Hayes argued that the Bitcoin bottom in May could have been a strong signal. Using on-chain data , Hayes predicts strong support at $25,000, given that $69,000 marked this cycle’s all-time high, a 64% drawdown.

Even though analysts might issue rosy price predictions, the threat of regulation continues to cap investor optimism and another blow came on June 2 when the U.S. Commodity Futures Trading Commission (CFTC) filed suit against Gemini Trust Co for alleged misleading statements in 2017 regarding the self-certification evaluation of a Bitcoin futures contract.

On June 7, a bill to ban digital assets as payment was introduced in the Russian parliament. The bill loosely defines digital financial assets as “electronic platforms,” which can be recognized as the subjects of the national payment system and obliged to submit to the central bank registry.

Bulls placed their bets at $32,000 and above

The open interest for the June 10 options expiry is $800 million but the actual figure will be much lower since bulls were overly-optimistic. These traders might have been fooled by the short-lived pump to $32,000 on May 31 because their bets for Friday's options expiry extend up to $50,000.

*Bitcoin options aggregate open interest for June 10. Source: CoinGlass*

The 0.94 call-to-put ratio shows the balance between the $390 million call (buy) open interest and the $410 million put (sell) options. Currently, Bitcoin stands near $30,000, meaning most bullish bets are likely to become worthless.

If Bitcoin's price moves below $30,000 at 8:00 am UTC on June 10, only $20 million worth of these call (buy) options will be available. This difference happens because a right to buy Bitcoin at $30,000 is useless if BTC trades below that level on expiry.

Bears aim for sub-$29,000 to profit $205 million

Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 10 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $28,000 and $29,000: 50 calls vs. 7,400 puts. The net result favors the put (bear) instruments by $205 million.
Between $29,000 and $30,000: 700 calls vs. 5,500 puts. The net result favors bears by $140 million.
Between $30,000 and $32,000: 3,700 calls vs. 3,400 puts. The net result is balanced between bulls and bears.
Between $32,000 and $33,000: 7,700 calls vs. 750 puts. The net result favors the call (bull) instruments by $220 million.

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.

Bulls will try to pin BTC above $30,000

Bitcoin bulls need to push the price above $30,000 on June 10 to avoid a $140 million loss. On the other hand, the bears’ best case scenario requires a pressure below $29,000 to maximize their gains.

Bitcoin bulls just had $200 million leverage long positions liquidated on June 6, so they should have less margin required to drive the price higher. With this said, bears will undoubtedly try to suppress BTC below $30,000 ahead of the June 10 options expiry.

Bitcoin bears have plenty of reasons to hold BTC price below $32,000

June 8, 2022 Coin Telegraph

Bitcoin bears have plenty of reasons to hold BTC price below ,000

Binance

Regulatory pressure and macroeconomic uncertainty continue to pin traders' sentiment and BTC price under $32,000.

Since May 10, the Bitcoin (BTC) chart shows a relatively tight range of price movement and the cryptocurrency has failed to break the $32,000 resistance on multiple occasions.

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

The choppy trading partially reflects the uncertainty of the stock market as the S&P 500 Index ranged from 3,900 to 4,180 in the same period. On one side, there has been economic growth in the Eurozone where the gross domestic product grew 5.1% year over year. On the other, inflation continues to soar, reaching 9% in the United Kingdom.

Further adding to Bitcoin's volatility was the digital assets regulatory framework proposal introduced to the U.S. Senate on June 7. The 69-page bipartisan bill is supported by Senator Cynthia Lummis of Wyoming and Senator Kirsten Gillibrand of New York and it addresses the CFTC’s authority over applicable digital asset spot markets.

On June 3, South Korea's Financial Supervisory Service (FSS) began an inquiry with 157 payment gateway services that work with digital assets. Previously, on May 24, South Korean officials opened an investigation against Do Kwon, the primary figure in the Terra incident.

The U.S. Securities and Exchange Commission (SEC) also broke out an investigation against Binance Holdings on June 6. Binance is the world's largest crypto exchange in volume terms and the SEC is evaluating whether the BNB token initial coin offering violated securities rules.

On June 6, IRA Financial Trust, a platform providing self-directed digital asset retirement and pension accounts, filed a lawsuit against Gemini cryptocurrency exchange and claimed that a Feb. 8 breach led to a $36 million loss in crypto assets from customer accounts under Gemini's custody.

Let's look at Bitcoin's futures data to understand how professional traders are positioned, including whales and market makers.

Derivatives metrics reflect investors’ bearish expectations

Traders should analyze Bitcoin futures market data to understand how professional traders are positioned. The quarterly contracts are experienced traders' preferred instrument to avoid the perpetual futures’ fluctuating funding rate.

The basis indicator measures the difference between longer-term futures contracts and the current spot market levels. The Bitcoin futures annualized premium should run between 5% to 10% to compensate traders for "locking in" the money for two to three months until the contract expiry.

Bitcoin's futures premium has been below 4% since April 12, a reading typical of bearish markets. Even more concerning is that the last time these professional traders were bullish was over six months ago when the metric surpassed the 10% threshold.

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

During bullish markets, options investors give higher odds for a price pump, causing the skew indicator to move below negative 12%. On the other hand, a bear market's generalized panic induces a positive 12% or higher skew.

The 30-day delta skew has ranged from 12.5% to 23% between June 1 and 7, which signals options traders are pricing higher odds of a bearish movement. Still, it shows a moderate sentiment improvement from the previous couple of weeks.

Cryptocurrency regulation and weak economic numbers are clearly weighing on investor sentiment and derivatives data shows professional Bitcoin traders avoiding leveraged long positions, plus they are reluctant to take downside-risk.

At the moment, it’s clear that bears are comfortable with setting $32,000 as a resistance level and repeat drops to the $28,200 level are likely to continue.

derivatives