Total crypto market cap risks a dip below $1 trillion if these 3 metrics don’t improve

June 3, 2022 Coin Telegraph

Total crypto market cap risks a dip below trillion if these 3 metrics don’t improve

Cardano

Declining demand for Tether, negative futures premiums for altcoins and the lack of inflow to the crypto sector are all signs that a rocky road is ahead.

The total crypto market capitalization has ranged from $1.19 trillion to $1.36 trillion for the past 23 days, which is a relatively tight 13% range. During the same time, Bitcoin’s (BTC) 3.5% and Ether’s (ETH) 1.6% gains for the week are far from encouraging.

To date, the total crypto market is down 43% in just two months, so investors are unlikely to celebrate even if the descending triangle formation breaks to the upside.

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

Regulation worries continue to weigh investor sentiment, a prime example being Japan’s swift decision to enforce new laws after the Terra USD (UST) — now known as TerraUSD Classic (USTC) — collapse. On June 3, Japan's parliament passed a bill to limit stablecoin issuing to licensed banks, registered money transfer agents and trust companies.

A few mid-cap altcoins rallied, but overall sentiment was unaffected

The bearish sentiment was clearly reflected in crypto markets as the Fear and Greed Index, a data-driven sentiment gauge, hit 10/100 on June 3. The indicator has been below 20 since May 8, as the total crypto capitalization lost the $1.7 trillion level to reach the lowest level since January 27.

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

Below are the winners and losers from the past seven days. While the two leading cryptocurrencies presented modest gains, a handful of mid-capitalization altcoins rallied 13% or higher.

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

Waves rallied 109% after liquidity was brought back to Vires Finance and the Neutrino Protocol USDN stablecoin re-established its $1.00 peg after a $1,000 daily withdrawal limit was imposed on USDT and USDC.

Cardano (ADA) gained 19% as investors expect the "Vasil" hard fork scheduled for June 29 to improve scalability and smart contract functionality, incentivizing deposits to the long-hyped decentralized finance applications on the network.

Stellar (XLM) hiked 18.6% after the remittance giant MoneyGram partnered with the Stellar Development Foundation, launching a service that allows its users to send and convert stablecoins into fiat currencies.

Solana (SOL) lost 8% due to an unexpected block production halt on June 1, requiring validators to coordinate another mainnet restart after four hours of outage. The persistent issue has negatively impacted the network on seven occasions over the past 12 months.

Data points to further price pressure

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 at a 2% or higher discount in Asian peer-to-peer markets since May 30. However, the indicator showed a modest deterioration as it bottomed at a 4% discount on June 1. This data leaves no doubt that retail traders were caught off-guard as the total crypto capitalization failed to break the $1.3 trillion resistance.

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 3. Source: Coinglass*

Perpetual contracts reflected mixed sentiment as Bitcoin and Ethereum held a slightly positive (bullish) funding rate, but altcoin rates were opposite. Solana's negative 0.20% weekly rate equals 0.8% per month, which is not a huge concern for most derivatives traders.

According to derivatives and trading indicators, the market is at risk of seeing more downside. Evidence of this can be seen in the slightly higher demand for bearish positions on altcoins and the evident lack of buying appetite from Asia-based retail markets.

Bulls need to display strength and hold the $1.19 trillion market capitalization support to avoid an increase in leveraged sellers, bearish bets and the subsequent negative price pressure.

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.

3 reasons why Ethereum price is pinned below $2,000

June 2, 2022 Coin Telegraph

3 reasons why Ethereum price is pinned below ,000

Coin Telegraph

ETH price is meeting strong resistance at the $2,000 level and these trading metrics explain why.

Ether’s (ETH) market structure continues to be bearish despite the failed attempt to break the descending channel resistance at $2,000 on May 31. This three-week-long price formation could mean that an eventual retest of the $1,700 support is underway.

*Ether/USD 4-hour price at Bitstamp. Source: TradingView*

On the non-crypto side, a number of equities-related factors are translating to negative sentiment in the crypto market. This week Microsoft (MSFT) lowered its profit and revenue outlook, citing challenging macroeconomic conditions. The U.S. Federal Reserve signalled in its periodic "Beige Book" that economic activity may have cooled in some parts of the country and the Fed is about to reduce its $9 trillion asset portfolio to combat persistent inflation.

On the bright side, an institutional investor survey published by The Economist magazine showed that 85% of the respondents agreed that open-source cryptocurrencies like Bitcoin (BTC) or Ether (ETH) are useful as diversifiers in portfolio or treasury accounts.

From the macroeconomic perspective, investors are still risk-averse, which could translate to a reduced appetite for cryptocurrencies.

Ethereum still has a mountain to climb

The Ethereum network's total value locked (TVL), the total amount of assets deposited to the network, has dropped by 5.5% since Ether began its downtrend three weeks ago.

*Ethereum network total value locked, ETH. Source: Defi Llama*

The network's TVL peaked at 28.7 billion Ether on May 10 and currently stands at 27.1 million. Decentralized finance (DeFi) deposits were deeply impacted by the USD Terra (UST) — now known as TerraUSD Classic (USTC) — stablecoin collapse on May 10. All things considered, the indicator shows a moderate decrease, which is somewhat expected after such an unprecedented event.

To understand how professional traders are positioned, let's look at Ether's futures market data. Quarterly futures are whales and arbitrage desks' preferred instruments due to their lack of a fluctuating funding rate.

These fixed-month contracts usually trade at a 5% to 12% premium to spot markets, indicating that sellers request more money to withhold settlement longer. This situation is also common in traditional assets such as stocks and commodities.

*Ether futures 3-month annualized premium. Source: Laevitas*

Over the past month, Ether's futures contracts premium has remained near 3%, which is below the 5% neutral-market threshold. The lack of leverage demand from buyers is evident as the current 2.5% basis indicator remains depressed despite Ether's 24% negative performance in three weeks.

Fear a global downturn continues to impact crypto prices

Ether's crash to $1,700 on May 27 drained any leftover bullish sentiment and, more importantly, caused $235 million in leverage long futures contract liquidations. Even though Ether price tested the $2,000 resistance on May 31, there is no evidence of strength from derivatives or DeFi deposits, according to the TVL metric.

As investors' focus remains on traditional markets and the impacts of global macroeconomic worsening conditions, there is little hope for a sustainable Ether price decoupling to the upside.

$32K Bitcoin price could turn the tides in Friday’s $160M BTC options expiry

June 2, 2022 Coin Telegraph

K Bitcoin price could turn the tides in Friday’s 0M BTC options expiry

Coin Telegraph

BTC price lost the momentum that had pushed it to $32,300 on May 31, but this week’s option expiry could help bulls recapture the key price level.

Twenty-three agonizing days have passed since Bitcoin (BTC) last closed above $32,000 and the 10% rally that took place on May 29 and 30 is currently evaporating as BTC price retraces toward $30,000. The move back to $30,000 simply confirms the strong correlation to traditional assets and in the same period, the S&P 500 also retreated 0.6%.

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

Weaker corporate profits could pressure the stock market due to rising inflation and the upcoming U.S. Federal Reserve interest rate hikes, according to Citi strategist Jamie Fahy. As reported by Yahoo! Finance, Citi’s research note to clients stated:

“Essentially, despite concerns regarding recession, earnings per share expectations for 2022/2023 have barely changed.”

In short, the investment bank is expecting worsening macroeconomic conditions to reduce corporate profits, and in turn, cause investors to reprice the stock market lower.

According to Jeremy Grantham, co-founder and chief investment strategist of GMO, “We should be in some sort of recession fairly quickly, and profit margins from a real peak have a long way that they can decline.”

As the correlation to the S&P 500 remains incredibly high, Bitcoin investors fear that the potential stock market decline will inevitably lead to a retest of the $28,000 level.

*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 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.

Currently, the S&P 500 and Bitcoin 30-day correlation stands at 0.88, which has been the norm for the past couple of months.

Bearish bets are mostly below $31,000

Bitcoin's recovery above $31,000 on May 30 took bears by surprise because only 20% of the put (sell) options for June 3 have been placed above such a price level.

Bitcoin bulls may have been fooled by the recent $32,000 resistance test and their bets for the $825 million options expiry go all the way to $50,000.

*Bitcoin options aggregate open interest for June 3. Source: CoinGlass*

A broader view using the 0.77 call-to-put ratio shows more bearish bets because the put (sell) open interest stands at $465 million against the $360 million call (buy) options. Nevertheless, as Bitcoin currently stands above $31,000, most bearish bets will likely become worthless.

If Bitcoin's price remains above $31,000 at 8:00 am UTC on June 3, only $90 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 $31,000 if it trades above that level on expiry.

Bulls might pocket a $160 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 3 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $29,000 and $30,000: 1,100 calls vs. 5,100 puts. The net result favors bears by $115 million.
Between $30,000 and $32,000: 4,400 calls vs. 4,000 puts. The net result is balanced between call (buy) and put (sell) instruments.
Between $32,000 and $33,000: 6,600 calls vs. 1,600 puts. The net result favors bulls to $160 million.
Between $33,000 and $34,000: 7,600 calls vs. 800 puts. Bulls extend their gains to $225 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 bears need to pressure the price below $30,000 on June 3 to secure a $115 million profit. On the other hand, the bulls' best case scenario requires a push above $33,000 to increase their gains to $225 million.

However, Bitcoin bears had $289 million leverage short positions liquidated on May 29, according to data from Coinglass. Consequently, they have less margin required to push the price lower in the short term.

With this said, the most probable scenario is a draw, causing Bitcoin price to range near $31,000 ahead of the June 3 options expiry.

Bitcoin price broke to the upside, but where are all the leveraged long traders?

June 1, 2022 Coin Telegraph

basis

BTC price looks to break out of its downtrend, yet pro traders are still unwilling to add leveraged positions.

This week's Bitcoin (BTC) chart leaves little doubt that the symmetrical triangle pattern is breaking to the upside after constricting the price for nearly 20 days. However, derivatives metrics tell a completely different story because professional traders are unwilling to add leveraged positions and are overcharging for downside protection.

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

Will BTC reverse course even as macroeconomic conditions crumble?

Whether BTC turns the $30,000 to $31,000 level into support depends to some degree on how global markets perform.

The last time U.S. stock markets faced a seven-week consecutive downtrend was over a decade ago. New home sales in the U.S. declined for the fourth straight month, which is also the longest streak since October 2010.

China saw a whopping 20% year-on-year decline for its on-demand services, the worst change on record. According to government data released on May 30, consumer spending for internet services from January to April stood at $17.7 billion.

The value of stock offerings in Europe also hit the worst level in 19 years after rising interest rates, inflation and macroeconomic uncertainties caused investors to seek shelter in cash positions. According to Bloomberg, initial public offerings and follow-on transactions raised a mere $30 billion throughout 2022.

All of the above make it easier to understand the discrepancy between the recent Bitcoin price recovery to $32,300 and weak derivatives data because investors are pricing higher odds of a downturn, primarily driven by worsening global macroeconomic conditions.

Derivatives metrics are neutral-to-bearish

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

According to data from Laevitas, Bitcoin's futures premium has been below 4% since April 12. This reading is typical of bearish markets and it’s worrisome that the metric failed to break above the 5% neutral threshold even as the price moved toward $32,000.

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

During bearish markets, options investors give higher odds for a price crash, causing the skew indicator to move above 12%. On the other hand, a bull markets' generalized excitement induces a negative 12% or lower skew.

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

The 30-day delta skew peaked at 25.4% on May 14, the highest-ever record and typical of extremely bearish markets. However, the situation improved on May 30 and 31 as the indicator stabilized at 14%, but it prices in higher odds of a price crash. Still, it shows a moderate sentiment improvement from derivatives traders.

The risks of a global economic slowdown are probably the main reason why Bitcoin options markets are stressed and why the futures premium is still low. The 30-day correlation of BTC versus the S&P 500 index is at 89%, meaning traders have fewer incentives to place bullish bets on cryptocurrencies.

Some metrics suggest that the stock market may have bottomed last week, especially since it’s trading 8.5% above the May 20 intraday low, but weak economic numbers are weighing on investor sentiment. This drives the risk-averse momentum and has a negative impact on cryptocurrency markets.

Until there's a better definition for traditional finance and the world's biggest economies, Bitcoin traders should continue to avoid building leveraged long positions and maintain a bearish stance, a feature that is currently reflected in options markets.

Goldman Sachs reportedly eyes crypto derivatives markets with FTX integration

June 1, 2022 Coin Telegraph

Binance

FTX has sought to integrate brokerage services internally to fulfill trades automatically, however, CFTC has called for greater scrutiny of the demand as it would lead to a monopoly of big players.

Goldman Sachs, one of the leading investment banks in the United States is reportedly trying to onboard some of its derivatives products into FTX.US crypto derivatives offerings.

Goldman Sachs has been in talks with FTX over regulatory and public listing help, and aims to expand into crypto derivatives offering by leveraging some of its own derivatives tools and services, reported Barron’s.

FTX.US, the U.S. subsidiary of global cryptocurrency exchange FTX is currently seeking to offer brokerage services for its derivatives offerings. This would allow the crypto exchange to handle the collateral and margin requirements internally rather than depending on “futures commission merchants” (FCMs). FTX.US president Brett Harrison said:

“We have multiple FCMs already committed to integrating technologically with the exchange. There are several large ones you can probably name.”

The U.S. Commodity Futures Trading Commission (CFTC) has sought public comments on the requested amendment from the crypto exchange. The chief regulatory body also believes that FTX’s proposal warrants scrutiny as it would lead to a monopoly by large investment banks such as Goldman.

According to people familiar with the matter, the integration of Goldman Sachs derivatives services would offer “trading futures directly, introducing clients and acting as an on-ramp to the exchange, or providing capital top-ups for clients.”

FTX has argued that an integrated brokerage model would help in making the market more stable and free. In a recent roundtable discussion with the CFTC, CEO Sam Bankman-Fried fielded several questions about crypto derivatives and FTX’s proposal to integrate its own FCM.

Crypto derivatives trading has been a topic of debate for quite some time, with many European and even the U.S. prohibiting most of the crypto exchanges from offering leveraged trading. Binance had to shut its derivatives offerings in several European countries post regulatory interventions.

On one hand, CFTC has called for greater scrutiny of FTX’s amendment demand, while on the other, FTX argues that an integrated brokerage model would help them calculate calculates margin requirements every 30 seconds, rather than waiting until the next day to liquidate positions.

Bitcoin’s recent gains have traders calling a bottom, but various metrics remain bearish

May 30, 2022 Coin Telegraph

Asia

The total crypto market capitalization recovered roughly 5%, but a variety of trading metrics show investors are skeptical about the rally being a trend change.

On May 30, the total crypto market capitalization gained 4% and currently is within reach of a $1.3 trillion market capitalization. The move was enough to erase the losses from the previous seven days and was driven mainly by Bitcoin's (BTC) 4.9% gain during that time frame.

Apart from Bitcoin, Cardano (ADA) was the only large-cap cryptocurrency that managed to close the week with a positive 4.5% performance. Meanwhile, Ether (ETH), BNB, Ripple (XRP) and Solana (SOL) failed to present weekly gains.

Bitcoin’s turn-around happened after the United States stock market presented gains for the first time after seven consecutive negative weeks. The longest losing streak in over a decade for the S&P 500 was followed by a 6.6% positive performance at the closing bell on May 22.

According to Yahoo! Finance, “a favorable batch of quarterly results from major retailers helped at least temporarily mitigate concerns over the toll [that ...] inflationary headwinds could take on profit margins.” For instance, Macy’s (M) gained 29.1% in the week, followed by Nordstrom (JWN) 25.4% positive performance and Ross Stores (ROST) rallied by 21.5%.

Curiously, JP Morgan sent out a research note to clients on May 25, claiming that $38,000 was the fair value for Bitcoin. The global investment bank also said that Terra's (LUNA) collapse did not harm the crypto venture capital demand.

On May 23, during the World Economic Forum (WEF) in Davos, Switzerland, PayPal vice president Richard Nash stated the company’s intention to embrace all possible crypto and blockchain services. After rolling out its Bitcoin trading across the United States in 2020, PayPal continues to expand its digital currency-related offering.

Below are the winners and losers from the past seven days. While the leading cryptocurrencies presented modest movements, some mid-capitalization altcoins presented high volatility.

Synthetix (SNX) rallied 15.8% after Kwenta, a zero-slippage derivatives trading application powered by Synthetix, reached $325 million in volume.

Helium (HNT) gained 15.2% after details regarding improvement proposal #51 were released on May 27. The change introduces a framework to enable subnets with their own token and governance.

STEPN Governance (GMT) lost 14.6% after blocking users based in mainland China from its mobile app.

Terra Luna Classic (LUNC), previously known as LUNA, moved down 12.2% after the South Korean authorities summoned all employees at Terraform Labs as part of a full-scale investigation.

Due to the mixed performance of altcoin markets, it is worth investigating how traders are positioned according to trading and derivatives indicators.

The Tether premium shows a lack of retail demand

The OKX Tether (USDT) premium is a good gauge of China-based retail trader crypto 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. On the other hand, during bearish markets, Tether's market offer is flooded, causing a 4% or higher discount.

Between May 23 and 30, the Tether premium in CNY terms has averaged a 2% discount, signaling a lack of retail demand. More importantly, the 4% crypto market capitalization rally on May 30 did not change investors' sentiment.

Derivatives indicators are slightly bearish for altcoins

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.

*Accumulated perpetual futures funding rate on May 30. Source: Coinglass*

Perpetual contracts reflect mixed sentiment as Bitcoin and Ether held a slightly positive (bullish) funding rate, but altcoins signaled the opposite. For example, Solana's negative 0.20% weekly rate equals 0.8% per month, which is irrelevant for most derivatives traders.

The data suggests that investors are not rushing in to confirm that the recent price recovery represents a trend change. While the total crypto market capitalization broke above the $1.3 trillion support, traders are pricing higher odds of a downturn. So far, there is no clear indication of a market bottom according to trading metrics.

Ethereum price dips below the $1.8K support as bears prepare for Friday’s $1B options expiry

May 26, 2022 Coin Telegraph

Ethereum price dips below the .8K support as bears prepare for Friday’s B options expiry

Beacon Chain

Looming macroeconomic concerns and this week’s $1B ETH options expiry threaten to pin Ethereum price under the $1,800 support.

Ether's (ETH) performance over the past three months has been less than satisfying for holders and the 50% correction since April 3 caused the altcoin to test the $1,800 support for the first time since July 2021.

*Ether/USD 1-day chart at Kraken. Source: TradingView*

Due to the volatility in stocks, investors had been seeking shelter in the United States dollar and on May 13 the DXY index reached its highest level in 20 years. DXY measures the USD against a basket of major foreign currencies, including the British Pound (GBP), Euro (EUR) and Japanese Yen (JPY).

Moreover, the 5-year U.S. Treasury yield reached its highest level since August 2018, trading at 3.10% on May 9 and signaling that investors demand larger returns to compensate for inflation. In a nutshell, macroeconomic data reflects risk-averse sentiment from investors and this partially explains Ether's downturn.

Further creating panic among Ether traders was a 7-block chain reorg on Ethereum's Beacon Chain on May 25. A valid transaction sequence was knocked off the chain due to a competing block getting more support from network participants. Fortunately, this situation is not uncommon and it might have emerged from a miner with high resources or a bug.

The main victim of Ether’s 11% price correction was leverage traders (longs) who saw $160 million in aggregate liquidations at derivatives exchanges, according to data from Coinglass.

Bulls placed their bets at $2,100 and higher

The open interest for the Ether’s May monthly options expiry is $1.04 billion, 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 $2,950 on May 4 because their bets for the May 27 options expiry extend beyond $3,000.

The drop below $1,800 took bulls by surprise because virtually none of the call (buy) options for May 27 have been placed below that price level.

*Ether options aggregate open interest for May 27. Source: CoinGlass*

The 0.94 call-to-put ratio shows the slight dominance of the $540 million put (sell) open interest against the $505 million call (buy) options. Nevertheless, as Ether stands near $1,800, every bullish bet is likely to become worthless.

If Ether's price remains below $1,800 at 8:00 am UTC on May 27, none of the $505 million call options will be available. This difference happens because a right to buy Ether at $1,800 or higher is worthless if Ether trades below that level on expiry.

Bears aim for a $325 million profit

Below are the three most likely scenarios based on the current price action. The number of options contracts available on May 27 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $1,600 and $1,700: 0 calls vs. 230,000 puts. The net result favors the put (bear) instruments by $370 million.
Between $1,700 and $1,800: 50 calls vs. 192,300 puts. The net result favors bears by $325 million.
Between $1,800 and $2,000: 3,300 calls vs. 150,000 puts. The net result favors the put (bear) instruments by $280 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 instance, 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.

Bulls should throw the towel and focus on the June expiry

Ether bears need to sustain the price below $1,800 on May 27 to secure a $325 million profit. On the other hand, the bulls' best case scenario requires a push above $1,800 to reduce the damage by $45 million.

Ether bulls had $160 million leverage long positions liquidated on May 26, so they should have less margin to drive the price higher. With this said, bears will undoubtedly try to suppress Ether below $1,800 ahead of the May 27 options expiry.

Bitcoin creeps toward $30K, but data shows bears in favor for Friday’s $1.8B BTC options expiry

May 25, 2022 Coin Telegraph

Bitcoin creeps toward K, but data shows bears in favor for Friday’s .8B BTC options expiry

Coin Telegraph

Traders are calling for a “relief rally” to $35,000, but derivatives data shows bears stand to profit from this week’s $1.81 billion BTC options expiry.

Bitcoin (BTC) price has been unable to close above $32,000 for the past fifteen days and is currently down 37% year-to-date. Although that might seem excessive, it does not stand out among some of the largest U.S.-listed tech companies which have also sustained notable losses recently.

In this same 15-day period, Shopify Inc. (SHOP) stock dropped 76%, Snap Inc. (SNAP) crashed 73%, Netflix (NFLX) is down 70% and Cloudflare (NET) presented a negative 62% performance.

Cryptocurrency investors should be less concerned about the current "bear market" considering Bitcoin's 79% annualized volatility. However, that is clearly not the case, because Bitcoin's "Fear and Greed Index" reached an 8 out of 100 on May 17, the lowest level since March 2020.

Traders fear that worsening macroeconomic conditions could cause investors to seek shelter in the U.S. dollar and Treasuries. Japan’s industrial production data released on May 18 showed a 1.7% contraction year over year. Moreover, May 20 retail sales data from the United Kingdom showed a 4.9% decline versus 2021.

Financial analysts across the globe blame the weakened market conditions on the U.S. Federal Reserve's slow reaction to the inflation surge. Thus, traders increasingly seek shelter outside of riskier assets, which negatively impacts Bitcoin price.

Bulls placed most bets above $40,000

The open interest for the monthly May 27 options expiry in Bitcoin is $1.81 billion, but the actual figure will be lower since bulls were caught by surprise as the BTC price has fallen 26% in the last 30 days.

*Bitcoin options aggregate open interest for May 27. Source: CoinGlass*

The 1.31 call-to-put ratio reflects the $1.03 billion call (buy) open interest against the $785 million put (sell) options. Nevertheless, 94% of the bullish bets will likely become worthless as Bitcoin currently trades near $30,000.

If Bitcoin's price remains below $31,000 on May 27, bulls will only have $60 million worth of these call (buy) options available. This difference happens because there is no use in a right to buy Bitcoin at $31,000 if it trades below that level on expiry.

Bears can secure a $390 million profit on May 27

Below are the three most likely scenarios based on the current price action. The number of options contracts available on May 27 for call (buy) and put (sell) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $28,000 and $30,000: 800 calls (buy) vs. 14,200 puts (sell). The net result favors bears by $390 million.
Between $30,000 and $32,000: 2,050 calls (buy) vs. 11,200 puts (sell). Bears have a $250 million advantage.
Between $32,000 and $33,000: 5,650 calls (buy) vs. 9,150 puts (sell). The net result favors bears by $110 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.

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 sustain the price below $30,000 on May 27 to profit $390 million from the monthly options expiry. On the other hand, bulls can reduce their loss by pushing BTC above $32,000, an 8% rally from the current $29,700 price. However, judging by the bearish macroeconomic conditions, bears seem better positioned for May 27 expiry.

Weak stocks and declining DeFi use continue to weigh on Ethereum price

May 24, 2022 Coin Telegraph

Coin Telegraph

Crumbling tech stock prices, declining DApp use and bearish derivatives data continue to pin ETH price below $2,000.

Ether’s (ETH) 12-hour closing price has been respecting a tight $1,910 to $2,150 range for twelve days, but oddly enough, these 13% oscillations have been enough to liquidate an aggregate of $495 million in futures contracts since May 13 according to data from Coinglass.

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

The worsening market conditions were also reflected in digital asset investment products. According to the latest edition of CoinShare's weekly Digital Asset Fund Flows report, crypto funds and investment products saw a $141 million outflow during the week ending on May 20. In this instance, Bitcoin (BTC) was the investors' focus after experiencing a $154 weekly net redemption.

Russian regulation and crumbling U.S. tech stocks escalate the situation

Regulatory uncertainty weighed on investor sentiment after an updated version of the Russian mining law proposal came to light on May 20. The document in the lower chamber of the Russian parliament no longer contained the obligation for crypto mining operators registry nor the one-year tax amnesty. As cited by local media, the legal State department stated that these measures could "possibly incur costs on the federal budget."

Additional pressure on Ether price came from the Nasdaq Composite Index's 2.5% downturn on May 24. In addition, the heavily-tech stock-driven indicator was pressured after social media platform Snap (SNAP) tumbled 40%, citing rising inflation, supply chain constraints and labor disruptions. Consequently, Meta Platforms (FB) shares fell by 10%.

On-chain data and derivatives are in favor of bears

The number of active addresses on the largest Ethereum network's decentralized applications (DApps) has dropped by 27% from the previous week.

*Ethereum network’s most active DApps in USD terms. Source: DappRadar*

The network's most active decentralized applications saw a substantial reduction in users. For instance, Uniswap V3 weekly addresses decreased by 24%, while Curve faced 52% fewer users.

To understand how professional traders, whales and market makers are positioned let's look at Ether's futures market data.

Quarterly futures are used by whales and arbitrage desks primarily due to their lack of a fluctuating funding rate. These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer.

These futures should trade at a 5% to 12% annualized premium in healthy markets. This situation is technically defined as "contango" and is not exclusive to crypto markets.

Ether's futures contracts premium went below the 5% neutral-market threshold on April 6. There's an evident lack of conviction from leverage buyers because the current 3% basis indicator remains depressed.

Ether might have gained 2% after testing the $1,910 channel resistance on May 24, but on-chain data shows a lack of user growth, while derivatives data point toward bearish sentiment.

Until there's some morale improvement that boosts the use of decentralized applications and the Ether futures premium regains the 5% neutral level, the odds of the price breaking above the $2,150 resistance seems low.

Bitcoin’s current setup creates an interesting risk-reward situation for bulls

May 23, 2022 Coin Telegraph

basis

A slight improvement in equities markets and the resilience of a few key BTC price metrics are giving bulls hope of a reversal.

The Bitcoin (BTC) chart has formed a symmetrical triangle, which currently holds a tight range from $28,900 to $30,900. This pattern has been holding for nearly two weeks and could potentially extend for another two weeks before price makes a more decisive movement.

For those unfamiliar with technical analysis, a symmetrical triangle can be either bullish or bearish. In that sense, the price converges in a series of lower peaks and higher lows. The decisive moment is the support or resistance breakthrough when the market finally decides on a new trend. Thus, the price could break out in either direction.

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 macro scenario has improved and BTC miners are staying busy

According to Cointelegraph, macroeconomic conditions driven by the United States helped drive crypto markets higher on May 23. Before the market opened, United States President Joe Biden announced plans to cut trade tariffs with China, boosting investors' morale.

According to the latest estimates, Bitcoin's network difficulty will reduce by 3.3% at its next automated readjustment this week. The change will be the largest downward shift since July 2021 and it’s clear that Bitcoin's downtrend has challenged miners' profitability.

Still, miners are not showing signs of capitulation even as their wallets' movements to exchanges hit a 30-day low on May 23, according to on-chain analytics platform Glassnode.

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

Bitcoin derivatives metrics are neutral-to-bearish

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 usually trade at a slight premium to spot markets because sellers are requesting more money to withhold settlement longer. This situation is known technically as "contango" and is not exclusive to crypto markets. Thus, futures should trade at a 5% to 15% annualized premium in healthy markets.

According to the above data, Bitcoin's basis indicator has been below 4% since April 12. This reading is typical of bearish markets, but the fact that it has not deteriorated after the sell-off down to $25,400 on May 12 is encouraging.

To exclude externalities specific to the futures instrument, traders also have to analyze Bitcoin options markets. The 25% delta skew is extremely useful because it shows when Bitcoin arbitrage desks and market makers are overcharging for upside or downside protection.

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

The skew indicator moved above 12% on May 9, entering the "fear" level as options traders overcharged for downside protection. Moreover, the recent 25.4% was the worst reading ever registered for the metric.

Be brave when most are fearful

In short, BTC options markets are still stressed and this suggests that professional traders are not confident in taking downside risk. Bitcoin's futures premium has been somewhat resilient, but the indicator shows a lack of interest from leveraged long buyers.

Taking a bullish bet might seem contrarian right now, but at the same time, an unexpected price pump would take professional traders by surprise. Therefore, it creates an interesting risk-reward situation for Bitcoin bulls.

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

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