futures

The market is hot, but Solana is not — Data explains why SOL price is lagging

November 5, 2022 Coin Telegraph

Alameda

SOL price has been in a 3 month downtrend, but recent newsflow and events could trigger a reversal.

Solana (SOL) has been in a steady downtrend for the past 3 months, but some traders believe that it may have bottomed at $26.80 on Oct. 21. Lately, there's been a lot of speculation on the causes for the underperformance and some analysts are pointing to competition from Aptos Network.

*Solana price at FTX, USD. Source: TradingView*

The Aptos blockchain launched on Oct. 17 and it claims to handle three times more transactions per second than Solana. Yet, after four years of development and millions of dollars in funding, the debut of the layer-1 smart contract solution was rather unimpressive.

It is essential to highlight that Solana presently holds an $11.5 billion market capitalization at the $32 nominal price level, ranking it as the seventh largest cryptocurrency when excluding stablecoins. Despite its size, SOL’s year-to-date performance reflects a lackluster 82% drop, while the broader global market capitalization is down 56%.

Unfortunate events have negatively impacted SOL’s price

The downtrend accelerated on Oct. 11 after a leading decentralized finance application on the Solana Network suffered a $116 million hack.

Mango Markets’ oracle was attacked due to the low liquidity on the platform's native Mango (MNGO) token which is used for collateral. To put things in perspective, the hack represented 9% of Solana's total value locked (TVL) in smart contracts.

Other negative news emerged on Nov. 2 as German data center operator and cloud provider Hetzner started blocking crypto-related activity. The company's terms of service prohibit customers from running nodes, mining and farming, plotting and storing blockchain data. Still, Solana nodes have other cloud storage providers to choose from, and Lido Finance confirmed that the risk for their validators had been mitigated.

A potentially promising partnership was announced on Nov. 2 after Instagram integrated support for Solana-based NFTs, allowing users to create, sell and showcase their favorite digital arts and collectibles. SOL immediately reacted with a 5.7% pump in 15 minutes but retraced the entire movement over the next hour.

To get a more granular view of what is going on with SOL price, traders can also analyze Solana's futures markets to understand whether the bearish newsflow has affected professional traders' sentiment.

Derivatives metrics show an unusual degree of apathy

Whenever there is relevant growth in the number of derivatives contracts currently in play, it usually means more traders are involved. In futures markets, longs and shorts are balanced at all times, but having a larger number of active contracts — open interest — allows the participation of institutional investors who require a minimum market size.

*Solana futures open interest, USD. Source: Coinglass*

In the past 30 days, the total open interest on Solana has been reasonably steady at $440 million. As a comparison, Polygon's (MATIC) aggregated futures position soared to $415 million from $153 million on Oct. 3.

BNB Chain's token (BNB) displayed a similar trend reaching $485 million, up from $296 million on Oct. 3.

With that said, open interest doesn't necessarily mean that professional investors are bullish or bearish. The futures annualized premium measures the difference between longer-term futures contracts and the current spot market levels.

The futures premium (basis rate) indicator should run between 4% to 8% to compensate traders for "locking in" the money until the contract expiry. Thus, levels below 2% are bearish, while numbers above 10% indicate excessive optimism.

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

Data from Laevitas shows that Solana's futures have been trading in backwardation for the past 30 days, meaning the futures' contract price is lower than regular spot exchanges.

Ether (ETH) futures are trading at a 0.5% annualized basis, while Bitcoin's (BTC) stands at 2%. The data is somewhat concerning for Solana since it signals a lack of interest from leverage buyers.

Rumors about Alameda Research could create more pressure

It is hard to pinpoint the reason for so much apathy about Solana and even the complete dominance of leverage short demand. Even more curious is Alameda Research’s influence on Solana projects. Alameda is the digital asset trading company spearheaded by Sam Bankman-Fried.

Recently, trader and crypto Twitter influencer Hsaka raised concerns about whether the firm has been suppressing SOL's price even after bullish catalysts emerged.

Entire market catching a bid meanwhile Sol aimlessly meandering after two hyper bullish catalysts in such an environment.

Alameda washed up. https://t.co/FuGQvMfRcF
— Hsaka (@HsakaTrades) November 4, 2022

It’s probably highly unlikely that market participants will really find out Alameda Research's impact on SOL price. Still, the theory raised by Hsaka could explain the rather unusual steady demand for leverage shorts and the negative basis rate. The arbitrage and market-making firm could have used derivatives instruments to reduce their exposure without selling SOL on the open market.

There are no signs that short sellers using SOL futures instruments are nearing liquidation or exhaustion, so their upper hand remains until the broader cryptocurrency market shows signs of strengthening.

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’s $20K support looks weak, but pro traders are neutrally positioned

November 3, 2022 Coin Telegraph

Bitcoin’s K support looks weak, but pro traders are neutrally positioned

Coin Telegraph

New data shows how pro traders are positioned as BTC price continues to encounter resistance at $21,000.

Bitcoin (BTC) has been lingering above $20,000 for the past nine days, but worsening conditions from traditional markets are causing traders to doubt if the support will hold.

On Nov. 3, the Bank of England raised interest rates by 75 basis points to 3%, its largest single hike since 1989. The risks of a prolonged recession also increased as the Monetary Policy Committee struggled to contain inflationary pressure.

The U.K. monetary authority noted that its most recent growth and inflation projections present a “very challenging” outlook for the economy. The statement from the committee added that “high energy prices and tighter financial conditions weigh on spending,” thus negatively pressuring the employment data.

The U.S. Federal Reserve also hiked interest rates on Nov. 2, the fourth consecutive raise, which brings rates to the highest levels since January 2008. The confirmation of a conservative approach from central banks can partially explain why Bitcoin failed to break the $21,000 resistance on Oct. 29 and has since declined by 4.5%.

Let’s take a look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Options traders are not particularly bullish

The 25% delta skew is a telling sign of when market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew indicator below -10%, meaning the bearish put options are discounted.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

The delta skew had been above the 10% threshold until Oct. 26, signaling that options traders were less inclined to offer downside protection. A more balanced situation emerged, but the $21,000 resistance test on Oct. 29 was not enough to instill confidence in option traders.

Currently, the 60-day delta skew stands at 6%, so whales and market makers are pricing similar odds of rallies and price dumps. However, other data is showing low confidence as BTC approaches the $20,000 support.

Leverage buyers ignored the recent rally

The long-to-short metric excludes externalities that might have solely impacted the options markets. It also gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts, thus offering better information on how professional traders are positioned.

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

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

Even though Bitcoin rallied 9% from Oct. 22 to Oct. 29, professional traders slightly reduced their leverage long positions, according to the long-to-short indicator.

For instance, the ratio for Binance traders improved somewhat from the 1.25 start, but then finished the period below its starting level at 1.22. Meanwhile, Huobi displayed a modest decrease in its long-to-short ratio, with the indicator moving from 1.03 to 1.00 in the seven days until Oct. 29.

At crypto exchange OKX, the metric slightly decreased from 1.01 on Oct. 22 to 0.94 on Oct. 29. This means that on average, traders were not confident enough to add leverage to bullish positions.

The $20,000 support is weak, but traders are not bearish

These two derivatives metrics — options skew and long-to-short — suggest that the 4.5% Bitcoin price correction since the $21,000 test on Oct. 29 was backed by a moderate level of distrust from leverage buyers.

A more optimistic sentiment would have caused the 60-day delta skew to enter the negative range and possibly have pushed the long-to-short ratio to higher levels. It is important to note that even pro traders can misinterpret the market, but the present reading from the derivatives market favors a weak $20,000 support.

From an optimistic perspective, there is no indication that pro traders expect a negative move. Basically, nothing changes even if the price revisits the $19,000 range because 50 days have passed since Bitcoin last traded above $22,000.

3 major mistakes to avoid when trading crypto futures and options

November 1, 2022 Coin Telegraph

Coin Telegraph

Leverage and hedging strategies are powerful ways to use derivatives contracts, but traders usually succumb to these three major mistakes.

Novice traders are usually drawn to futures and options markets due to the promise of high returns. These traders watch influencers post incredible gains, and at the same time, the multiple advertisements from derivatives exchanges that offer 100x leverage are at times irresistible for most.

Although traders can effectively increase gains with recurring derivatives contracts, a few mistakes can quickly turn the dream of outsized gains into nightmares and an empty account. Even experienced investors in traditional markets fall victim to issues particular t cryptocurrency markets.

Cryptocurrency derivatives function similarly to traditional markets because buyers and sellers enter into contracts dependent on an underlying asset. The contract cannot be transferred across different exchanges, nor can it be withdrawn.

Most exchanges offer options contracts priced in Bitcoin (BTC) and Ether (ETH), so the gains or losses will vary according to the asset’s price fluctuations. Options contracts also offer the right to acquire and sell at a later date for a predetermined price. This gives traders the ability to build leverage and hedging strategies.

Let’s investigate three common errors to avoid when trading futures and options.

Convexity can kill your account

The first issue traders face when trading cryptocurrency derivatives is called convexity. In this situation, the margin deposit changes its value as the underlying asset’s price oscillates. As Bitcoin’s price increases, the investor’s margin rises in U.S. dollar terms, allowing additional leverage.

The issue emerges when the opposite movement occurs and BTC price collapses; consequently, the users’ deposited margin decreases in U.S. dollar terms. Traders often get too excited when trading futures contracts, and positive headwinds reduce their leverage as BTC price increases.

The main takeaway is that traders should not increase positions solely due to the delivery caused by the increasing value of margin deposits.

Isolated margin has benefits and risks

Derivatives exchanges require users to transfer funds from their regular spot wallets to futures markets, and some will offer an isolated margin for perpetual and monthly contracts. Traders have the option to select between cross collateral, meaning the same deposit serves multiple positions or is isolated.

There are benefits for each option, but novice traders tend to get confused and are liquidated due to failing to administer the margin deposits correctly. On the other hand, isolated margin offers more flexibility to support risk, but it requires additional maneuvers to prevent excessive liquidations.

To solve such an issue, one should always use cross margin and manually enter the stop loss on every trade.

Beware, not every options market has liquidity

Another common mistake involves trading illiquid options markets. Trading illiquid options drives up the cost of opening and closing positions, and options already have embedded expenses due to crypto’s high volatility.

Options traders should ensure the open interest is at least 50x the number of contacts desired to trade. Open interest represents the number of outstanding contracts with a strike price and expiration date that have been previously bought or sold.

Understanding implied volatility can also help traders make better decisions about the current price of an options contract and how they might change in the future. Keep in mind that an option’s premium increases alongside higher implied volatility.

The best strategy is to avoid buying calls and puts with excessive volatility.

It takes time to master derivatives trading, so traders should start small and test each function and market ahead of placing large bets.

2 metrics signal the $1T crypto market cap support likely won’t hold

October 31, 2022 Coin Telegraph

2 metrics signal the T crypto market cap support likely won’t hold

Asia

Despite the 8.5% weekly rally in cryptocurrencies, the lack of stablecoin premiums in Asia and futures markets activity shows buyers’ lack of confidence.

Cryptocurrencies broke the $1 trillion market capitalization resistance on Oct. 26, which had been holding strong for the previous 41 days. Despite Bitcoin’s (BTC) modest 5.5% weekly gains, the aggregate value of 20,000 listed tokens increased by 8.5% between Oct. 24 and 31.

*Total crypto market cap, USD (in billions). Source: TradingView*

The cryptocurrency market was positively impacted by a 6.3% weekly rally in the Russell 2000 mid-capitalization stock market index. Some encouraging news accompanied the positive tailwinds from traditional markets.

For instance, 55,000 BTC was withdrawn from Binance on Oct. 26, a record high. Typically, analysts consider the reduced number of coins deposited on exchanges a bullish indicator, as the immediate selling pressure eases.

Moreover, exchange and wallet provider Blockchain.com partnered with payment processing giant Visa to launch a crypto card. The cryptocurrency company revealed on Oct. 26 that there would be no sign-up or annual fees, no transaction fees and users would earn 1% of all purchases back in digital assets.

Instead of focusing on Bitcoin, cryptocurrency traders have spread their bets across altcoins. Consequently, comparing the winners and losers among the top 80 coins provides skewed results, as seven rallied 20% or more over the past week.

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

Dogecoin (DOGE) rallied 112% after Elon Musk, the billionaire CEO of SpaceX and Tesla, completed his acquisition of the Twitter social media network. Musk’s widely known passion for the memecoin inspired traders to raise expectations of potential payment integrations.

Mina Protocol’s MINA token gained 28% following its ecosystem update report on Oct. 27, which highlighted its zero-knowledge testnet. The protocol promises efficient layer-1 smart contract zkApps, adding unique privacy features and the ability to connect to external data sources.

The native tokens of smart contract networks Klaytn, Cosmos and Avalanche — KLAY, ATOM (ATOM) and AVAX (AVAX), respectively — rallied following Ether’s (ETH) 16.5% gains. Moreover, the Ethereum network has remained clogged, with average transaction fees above $3 for the past three weeks.

Stablecoin demand remained neutral in Asia

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

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

*USDC peer-to-peer vs. USD/CNY. Source: OKX*

Currently, the USDC premium stands at 100.8%, flat versus the previous week. Therefore, despite the 8.5% cryptocurrency market capitalization increase, no additional demand came from Asian retail investors. However, such data should not be worrisome, as it partially reflects the total capitalization being down 56% year-to-date.

Futures markets show mixed sentiment

Perpetual contracts, also known as inverse swaps, have an embedded rate 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 Oct. 31. Source: Coinglass*

As depicted above, the accumulated seven-day funding rate is either slightly positive or neutral for the largest cryptocurrencies by open interest. Such data indicates a balanced demand between leverage longs (buyers) and shorts (sellers).

Considering the absence of stablecoin demand in Asia and mixed perpetual contract premiums, traders lack confidence even though the total crypto capitalization broke above the $1 trillion mark.

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.

Ethereum price hits $1.6K as markets expect the Fed to ease the pressure

October 31, 2022 Coin Telegraph

Ethereum price hits .6K as markets expect the Fed to ease the pressure

Coin Telegraph

ETH price rose to its highest level since September, but data shows whales lack an appetite for leverage longs.

A $250 surprise rally took place between Oct. 25 and Oct. 26, pushing the price of Ether (ETH) from $1,345 to $1,595. The movement caused $570 million in liquidations in Ether’s bearish bets at derivatives exchanges, which was the largest event in more than 12 months. Ether’s price also rallied above the $1,600 level, which was the highest price seen since Sept. 15.

Let’s explore whether this 27% rally over the past 10 days reflects any signs of a trend change.

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

It is worth highlighting that another 10.3% rally toward $1,650 happened three days later on Oct. 29, and this triggered another $270 million of short seller liquidations on ETH futures contracts. In total, $840 million worth of leveraged shorts was liquidated in three days, representing over 9% of the total ETH futures open interest.

On Oct. 21, the market became optimistic after San Francisco Federal Reserve President Mary Daly mentioned intentions to step down the pace of interest rate hikes. However, the United States central bank’s previous tightening movement has led the S&P 500 stock market index to a 19% contraction in 2022.

Despite the 5.5% stock market rally between Oct. 20 and Oct. 31, analysts at ING noted on Oct. 28 that “we do indeed expect the Fed to open the door to a slower pace through formal forward guidance, but it may not necessarily go through it.” Furthermore, the ING report added, “It could be that we get a final 50bp in February that would then mark the top. This would leave a terminal rate of 4.75% to 5%.”

Considering the conflicting signals from traditional markets, let’s look at Ether’s derivatives data to understand whether investors have been supporting the recent price rally.

Futures traders kept a bearish stance despite the $1,600 rally

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the fluctuation of funding rates that often occurs in a perpetual futures contract.

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

The indicator should trade at a 4% to 8% annualized premium in healthy markets to cover costs and associated risks. Hence, the above chart clearly shows a prevalence of bearish bets on ETH futures, as its premium stood in the negative area in October. Such a situation is unusual and typical of bearish markets, reflecting professional traders’ unwillingness to add leveraged long (bull) positions.

Traders should also analyze Ether’s options markets to exclude externalities specific to the futures instrument.

ETH options traders moved to a neutral positioning

The 25% delta skew is a telling sign of when market makers and arbitrage desks are overcharging for upside or downside protection.

*Ether 60-day options 25% delta skew: Source: Laevitas*

The 60-day delta skew had been above the 10% threshold until Oct. 25, and signaling options traders were less inclined to offer downside protection. However, a significant change happened over the following days as whales and arbitrage desks started to price a balanced risk for downward and upward price swings.

Liquidations show a surprise move, but minimal confidence from buyers

These two derivatives metrics suggest that Ether’s 27% price rally from Oct. 21 to Oct. 31 was not expected, which explains the huge impact on liquidations. In comparison, a 25% Ether rally from Aug. 4 to Aug. 14 caused $480 million worth of leveraged short (sellers) liquidations, roughly 40% lower.

Currently, the prevailing sentiment is neutral according to ETH options and futures markets. Therefore, traders are likely to tread carefully, especially when whales and arbitrage desks have stood on the sidelines during such an impressive rally.

Until there is confirmation of the $1,500 support level’s strength and pro traders’ increased appetite for leverage longs, investors should not rush to the conclusion that the Ether rally is sustainable.

Bitcoin fails to break the $21K support, but bears remain shy

October 31, 2022 Coin Telegraph

Bitcoin fails to break the K support, but bears remain shy

Coin Telegraph

BTC futures and stablecoin margin data shows a lack of appetite from buyers even as Bitcoin gained 7.5% in a week.

Bitcoin (BTC) rallied on the back of the United States stock market’s 3.4% gains on Oct. 28, with the S&P 500 index rising to its highest level in 44 days. In addition, recently released data showed that inflation might be slowing down, which gave investors hope that the Federal Reserve might break its pattern of 75 basis-point rate hikes after its November meeting.

In September, the U.S. core personal consumption expenditures price index rose 0.5% from the previous month. Although still an increase, it was in line with expectations. This data is the Federal Reserve’s primary inflation measure for interest rate modeling.

Additional positive news came from tech giant Apple, which reported weak iPhone revenues on Oct. 27 but beat Wall Street estimates for quarterly earnings and margin. Moreover, Apple chief financial officer Luca Maestri said services would grow year-over-year in the fourth quarter.

Bitcoin futures data shows reluctant buyers

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the perpetual fluctuation of contracts’ funding rates.

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

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

Bitcoin’s futures premium has stood below 2% for the past 30 days, signaling a complete lack of interest from leverage buyers. Furthermore, there was no significant improvement on Oct. 29 as BTC rallied toward the $21,000 resistance.

In a nutshell, derivatives traders are far from optimistic about Bitcoin’s price despite the low cost of adding bullish positions. Still, one must also analyze the BTC margin markets to exclude externalities specific to the futures instrument.

Derivative traders are unwilling to place bullish bets

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

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

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

The chart above shows that investors’ morale topped on Oct. 13 as the ratio reached 23.5, which is seldom sustainable for longer-term periods. From that point onward, OKX traders presented less demand for borrowing Tether, exclusively used to bet on the price uptrend.

Still, the ratio currently stands at 7.5, leaning bullish in absolute terms, as it favors stablecoin borrowing by a wide margin. It is worth highlighting that no sentiment change happened despite Bitcoin’s 7.5% weekly rally between Oct. 24 and Oct. 31.

A lack of excitement does not mean bearishness

Derivatives data shows no demand from buyers even as Bitcoin flirted with $21,000 on Oct. 29. Unlike retail traders, these experienced whales tend to anticipate movements by holding on to their conviction even when markets move the opposite way.

The above data suggests that traders expecting Bitcoin to break above $21,000 in the short term will likely be disappointed. However, on a positive note, there has been no sign of bears getting more confident, as both futures and margin markets remain neutral to bullish.

3 key Solana metrics explain exactly why SOL price is down

October 19, 2022 Coin Telegraph

Coin Telegraph

SOL price is down 29% since August, and three key metrics suggest bulls are in no rush to return.

The past eighty days have been moderately bearish for cryptocurrencies as the altcoin market capitalization declined by 16%. The downside movement can be partially explained by the United States Federal Reserve’s quantitative tightening, rising interest rates and the halting of asset purchases. Although they are aimed at curbing inflationary pressure, the policy also increases borrowing costs for consumers and businesses.

The downfall of Solana’s SOL (SOL) token has been even more brutal, with the altcoin facing a 29% correction since August. The smart contract network focuses on low fees and speed, but the frequent outages highlight a centralization issue.

*Solana/USD price (blue) vs. altcoin capitalization (orange). Source: TradingView*

The latest setback occurred on Sept. 30 after a misconfigured validator halted blockchain transactions. A duplicate node instance caused the network to fork, as the remaining nodes could not agree on the correct chain version.

Recently, Solana co-founder Anatoly Yakovenko placed his bets on Firedancer, a scaling solution developed by Jump Crypto in partnership with the Solana Foundation. Dubbed the long-term fix to the network outage problem, the mechanism should be ready for testing in the coming months.

On Oct. 11, Solana-based decentralized finance exchange Mango Markets was hit with an exploit of over $115 million. The attacker successfully manipulated the value of MNGO native token collateral, taking out “massive loans” from Mango’s treasury.

Solana’s TVL and the number of active addresses dropped

Solana’s primary decentralized application metric started to display weakness earlier in November. The network’s total value locked (TVL), which measures the amount deposited in its smart contracts, broke to its lowest level since September 2021 at 30.4 million SOL.

*Solana network total value locked, SOL. Source: DefiLlama*

There are other factors that influence Solana’s decrease in value and TVL. To confirm whether DApp use has effectively decreased, investors should also analyze the number of active addresses within the ecosystem.

*Solana DApps 30-day on-chain data. Source: DappRadar*

Oct. 19 data from DappRadar shows that the number of Solana network addresses interacting with decentralized applications declined in 13 of the top 20 DApps. The reduced interest was also reflected in SOL’s futures markets.

Fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. Whenever this indicator fades or turns negative, this is an alarming, bearish red flag signaling a situation known as backwardation.

*Solana 3-month futures annualized basis. Source:* *Laevitas*

The above chart shows how Solana futures have been trading at a 7% discount versus the current spot price. This data is concerning since it signals a lack of interest from leverage buyers.

SOL will continue to underperform until it flips these metrics

It’s difficult to pinpoint the exact reason for Solana’s price drop, but it is clear that centralization issues, a decrease in the network’s DApp use and fading interest from derivatives traders certainly played a role.

Should the sentiment flip, there should be an inflow of deposits, increasing Solana’s TVL and the number of active addresses. Consequently, the above data suggest that Solana holders should not expect a price bounce anytime soon because the network health metrics remain under pressure.

Over $256,000,000 in Bitcoin and Crypto Liquidated as US Inflation Report Triggers Flash Crash

October 13, 2022 The Daily Hodl

Bitcoin traders were ready for a hot CPI report, but BTC bears are still in control

October 13, 2022 Coin Telegraph

Coin Telegraph

BTC nose-dived to its lowest level since Sept. 21, and data shows pro traders continue to avoid leverage longs.

Cryptocurrency traders were caught by surprise after the Oct. 13 Consumer Price Index Report showed inflation in the United States rising by 0.6% in September versus the previous month. The slightly higher-than-expected number caused Bitcoin (BTC) to face a 4.4% price correction from $19,000 to $18,175 in less than three hours.

The abrupt movement caused $55 million in Bitcoin futures liquidations at derivatives exchanges, the largest amount in three weeks. The $18,200 level was the lowest since Sept. 21 and marks an 8.3% weekly correction.

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

It is worth highlighting that the dip under $18,600 on Sept. 21 lasted less than 5 hours. Bears were likely disappointed as a 6.3% rally took place on Sept. 22, causing Bitcoin to test the $19,500 resistance. A similar trend is happening on Oct. 13 as BTC currently trades near $19,000.

The stock market also reacted negatively as the tech-heavy Nasdaq Composite index moved down 3% after the inflation data was released. After the initial panic selling, Nasdaq adjusted to a 2% daily loss as analysts reaffirmed their expectations toward a 0.75% interest rate increase by the U.S. Federal Reserve Committee in November.

Investors became even more bearish after BlackRock Inc (BLK) reported a 16% drop in profit versus the previous year. Meanwhile, financial heavyweights JPMorgan Chase (JPM) and Morgan Stanley (MS) are set to report on Oct. .

Contrary to U.S. President Joe Biden's appeal, Saudi Arabia's Ministry of Foreign Affairs put out a rare statement on Oct. 13 defending the Organization of the Petroleum Exporting Countries' production cut. The White House wanted to delay the decision until after the midterms. Nevertheless, the oil producer group decided to decrease the supply target by 2 million barrels per day beginning in November.

All of these developments are increasing investors’ bearish emotions. ao get a better gauge on what is happening in the crypto sector, traders should look at derivatives data to see if investors were taken by surprise after the 4.4% dip below $18,200.

Futures markets were bearish for the past month

Retail traders usually avoid quarterly futures due to their price difference from spot markets. They are, however, professional traders' preferred instruments because they prevent the fluctuation of funding rates that often occurs in a perpetual futures contract.

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

The indicator should trade at a 4% to 8% annualized premium in healthy markets to cover costs and associated risks. Derivatives traders had been neutral to bearish for the past month because the Bitcoin futures premium remained below 1% the entire time.

This data reflects professional traders' unwillingness to add leveraged long (bull) positions despite the low cost. However, one must also analyze the Bitcoin options markets to exclude externalities specific to the futures instrument.

Option traders are unwilling to offer downside protection

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection. For example, in bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%. On the other hand, bullish markets tend to drive the skew indicator below negative 12%, meaning the bearish put options are discounted.

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

The 30-day delta skew had been above the 12% threshold since Oct. 10, signaling that options traders were less inclined to offer downside protection. These two derivatives metrics suggest that the Bitcoin price dump on Oct. 13 might have been partially expected, which explains the relatively low impact on liquidations.

More importantly, the prevailing bearish sentiment remained after the CPI inflation was announced. Consequently, whales and markers are less inclined to add leverage longs or offer downside protection. Considering the weak macroeconomic conditions and global political tension, the odds currently favor the bears.

Grayscale Investments Makes Move Against SEC, Files Opening Legal Brief in ETF Rejection Lawsuit

October 12, 2022 The Daily Hodl

Unfortunate events have negatively impacted SOL’s price

Derivatives metrics show an unusual degree of apathy

Rumors about Alameda Research could create more pressure

Options traders are not particularly bullish

Leverage buyers ignored the recent rally

The $20,000 support is weak, but traders are not bearish

Convexity can kill your account

Isolated margin has benefits and risks

Beware, not every options market has liquidity

Stablecoin demand remained neutral in Asia

Futures markets show mixed sentiment

Futures traders kept a bearish stance despite the $1,600 rally

ETH options traders moved to a neutral positioning

Liquidations show a surprise move, but minimal confidence from buyers

Bitcoin futures data shows reluctant buyers

Derivative traders are unwilling to place bullish bets

A lack of excitement does not mean bearishness

Solana’s TVL and the number of active addresses dropped

SOL will continue to underperform until it flips these metrics

Futures markets were bearish for the past month

Option traders are unwilling to offer downside protection

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