Bitcoin price surges, but derivatives metrics reflect pro trader’s neutral sentiment

March 28, 2022 Coin Telegraph

Asia

BTC and ETH prices are in a clear bull trend, but derivatives data shows pro traders haven’t turned into bulls just yet.

As Bitcoin (BTC) finally broke out of the $46,000 resistance on March 27, traders were quick to conclude that the bearish trend was gone for good. Even as the price hit its highest level in 84 days, derivatives metrics and Asia’s Tether premium still show a lack of bullish sentiment.

While analysts will struggle to find a rationale for the modest 5.8% 24-hour gain that pushed Bitcoin above $48,500, we still have to account for the daily 3.8% average volatility.

For instance, over the past 12 months, BTC presented a daily swing higher than 5.8% in 44 instances, ranging from a negative 14.4% on May 19, to a 14.6% price increase on Feb. 28.

Bitcoin’s rally caused the broader crypto market capitalization to hike 15.3% over the past week, reaching $2.2 trillion. Curiously, Bitcoin gained 15.7% and Ether (ETH) 15.8%, pretty much in line with the altcoin’s average.

Still, they were no match for the altcoin rally that followed. Below are the top gainers and losers among the 80 largest cryptocurrencies by market capitalization.

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

Zilliqa (ZIL) announced a partnership with payments infrastructure provider Ramp, and is expected to release its metaverse project called Metapolis which will be built on unreal gaming engine, the same 3D technology behind Fortnite and PlayerUnkown’s Battlegrounds, or PUBG.

Loopring (LRC) price surged by 51% after GameStop’s upcoming NFT marketplace integrated the Loopring network on March 23 and Axie Infinity (AXS) rallied 41% as the team outlined plans to progressively give control over the project’s treasury and governance control.

Axie is also expected to launch the Origin game over the next couple of weeks, which includes a reimagined storyline and the addition of active cards for eye and ear body parts.

Tether premium indicates weak retail demand

The OKX Tether (USDT) premium is a good gauge of China-based retail trader demand for crypto. It measures the difference between China-based USDT peer-to-peer trades and the official U.S. dollar currency.

Excessive buying demand tends to pressure the indicator above fair value, which is 100%. On the other hand, Tether‘s market offer is flooded during bearish markets, causing a 4% or higher discount.

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

Currently, the Tether premium stands at 99.9%, which is neutral. Thus, data shows retail demand is not picking up despite the price improvement, which is odd considering that the total cryptocurrency capitalization jumped 15.3%.

Funding rates show undecided traders

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Perpetual futures are retail traders‘ preferred derivatives because their price tends to track regular spot markets perfectly.

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.

Notice how the accumulated seven-day funding rate is uneventful in most cases. This data indicates a balanced leverage demand between longs (buyers) and sellers (shorts).

For example, Solana’s (SOL) positive 0.20% weekly rate equals 0.8% per month, which is not a burden for traders building futures positions. Typically, when there‘s an imbalance caused by excessive optimism, that rate can easily surpass 5% per month.

Some might say that the Bitcoin price hike above $47,000 was the nail in the coffin for the bears because the cryptocurrency displayed strength during global macroeconomic uncertainty.

At the moment, there are no signs of bullishness from Asian retail traders, as measured by the CNY Tether premium and there is no indication of pressure from leverage longs (buyers) on futures markets. Therefore, the overall crypto market sentiment is neutral.

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.

2 metrics signal traders do not expect $2T crypto market cap anytime soon

March 21, 2022 Coin Telegraph

2 metrics signal traders do not expect T crypto market cap anytime soon

Coin Telegraph

Despite only one coin among the top-80 declining over the past week, Tether and futures premiums show a lack of excitement in the market.

Cryptocurrencies failed to break the 42-day long downtrend after the $1.95 trillion capitalization resistance was rejected on March 20. Even though Bitcoin (BTC) gained a modest 3.7% over the past seven days, altcoins presented a robust rally.

Crypto markets' aggregate capitalization showed a 6.2% increase to $1.92 trillion between March 14-21. Such performance was positively impacted by Ether's (ETH) 14% gains, Cardano (ADA) increasing 13%, and Solana (SOL) gaining 10%.

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

While those assets were not the biggest weekly gains among the top-80 coins, Ether may have fueled investors' expectations after Glassnode's on-chain data showed that ETH balances on crypto exchanges reached their lowest levels since 2018.

Comparing the winners and losers provides skewed results as only two names presented negative performances over the past seven days:

Ethereum Classic (ETC) rallied 51% after the HebeSwap decentralized exchange application surpassed $290 million in total value locked. With liquidity pools growing on the protocol, Ethereum Classic appears to have a decentralized finance (DeFi) hub of its own.

AAVE gained 35% following its v3 liquidity pool upgrade on March 16, adding cross-chain asset functionality, a community contribution tool, and a gas optimization model. Several wallet-based decentralized applications (DApps) will be integrated, including Instadapp, Debank, 1Inch, Paraswap, Zapper, DeFisaver, Zerion and more.

Kusama (KSM) gained 31% after Parity Technology confirmed that it will enable parachain (sidechain) swaps on the upcoming 0.9.18 release. Moreover, Manta Network's on-chain privacy Dolphin Testnet reached 30,000 transactions on March 14.

Tether premium shows slight discomfort

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 trades and the U.S. dollar.

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

Currently, the Tether premium stands at 99.9%, its lowest level since March 3. While distant from retail panic selling, the indicator showed a modest deterioration over the past week.

Still, weaker retail demand is not worrisome as it partially reflects the total cryptocurrency capitalization, which is down 46% 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 March 21. Source: Coinglass*

As depicted above, the accumulated seven-day funding rate is slightly positive for Bitcoin and Ether. This data indicates slightly higher demand from longs (buyers), but it is insignificant. For example, Solana's positive 0.20% weekly rate equals 0.8% per month, which should not be a concern for most futures traders.

On the other hand, both Terra (LUNA) and Polkadot (DOT) futures showed slightly more demand from shorts (sellers). Thus, the absence of Tether demand in Asia and mixed perpetual contract premiums signal a lack of confidence from traders despite the recent price gains.

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 rally hopes diminish as pro traders flip bearish, retail interest at 12-month lows

March 18, 2022 Coin Telegraph

Bitcoin Price

A symmetrical triangle shows support at $38,000 but pro traders have failed to add leverage long positions, according to exchanges' data.

Bitcoin (BTC) has been trapped in a symmetrical triangle for 56 days and the trend change could last until early May, according to price technicals.

Currently, the support level stands at $38,000, while the triangle resistance for daily close stands at $43,600.

Bitcoin mining up, retail interest down

*Bitcoin/USD price at FTX. Source: TradingView*

The week started with a positive achievement for the Bitcoin network as the Lightning Network capacity reached a record-high 3,500 BTC. This solution allows extremely cheap and instant transactions on a secondary layer, known as off-chain processing.

After cryptocurrency mining activities were banned in China in 2021, publicly-listed companies in the United States and Canada attracted most of this processing power.

As a result, Bitcoin's hash has recovered dramatically since the summer. It's currently at all-time highs at over 200 EH/s. According to the Cambridge Bitcoin electricity consumption index, 45% of the global hash rate derives from North America.

Furthermore, Whit Gibbs, the founder and CEO of Compass Mining, stated that "public mining companies definitely have an advantage when it comes to holding Bitcoin because they have access to the capital markets." In addition, there is less selling pressure as miners' reserves have been steadily increasing.

*Global search for the “Bitcoin” term. Source: Google Trends*

Meanwhile, searches for "Bitcoin" on Google are nearing their lowest levels in 12 months. This indicator could partially explain why Bitcoin is 41% below its $69,000 all-time high, i.e., public interest is low. Still, one needs to analyze how professional traders are positioning themselves, and there's no better gauge than derivatives markets.

Long-to-short data confirms lack of excitement

The top traders' long-to-short net ratio excludes externalities that might have impacted specific derivatives instruments. By analyzing these top clients' positions on the spot, perpetual and 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.

Exhanges' top traders Bitcoin long-to-short ratio. Source: Coinglass

Bitcoin might have jumped 8% since March 13, but professional traders did not increase their bullish bets according to the long-to-short indicator. For instance, Huobi's top traders' ratio slightly decreased from 1.10 to the current 1.06 level.

Moreover, OKX data shows those traders reducing their longs from 1.26 to 1.03 significantly reducing their longs. Binance was the only exception, as top traders increased their longs from 1.05 to 1.13. Still, there has been a slight 0.06 decrease across the three major exchanges on average.

Can the triangle break to the upside?

From the perspective of the metrics discussed above, there is hardly any sense that Bitcoin price will flip bullish in the short-term. Data suggests that pro traders have reduced their long positions, as expressed by the basis rate and long-to-short ratio.

Moreover, the broader Google search trend signals retail interest is not picking up despite high inflation data and global socio-political uncertainties. For now, the odds of the symmetrical triangle breaking for the upside seem dim.

Bitcoin’s got 3 strikes, but investors remain calm despite price drop

March 14, 2022 Coin Telegraph

China

Proof-of-work mining escaped severe regulatory pressure, but crypto derivatives and CNY Tether premium show investors' lack of excitement.

After Bitcoin (BTC) faced its third consecutive rejection, investors became more confident in adding altcoin positions. For the leading cryptocurrency, the path to $50,000 appears more challenging than previously expected.

According to Euronews Next, on March 14, the European Union rejected a proposed rule that could have banned the energy-intensive proof-of-work (PoW) mining algorithm used by Bitcoin and other cryptocurrencies. Several EU parliamentarians have been pushing to ban PoW mining over energy concerns.

*BTC/USD price at FTX. Source: TradingView*

In terms of performance, the aggregate market capitalization of all cryptos was relatively flat over the past seven days, registering a modest 0.4% gain to $1.77 trillion. However, the apparent lack of performance in the overall market does not represent some mid-capitalization altcoins, which managed to gain 17% or more in one week.

Bitcoin presented a 2.5% gain over the previous seven days, while the vice-leader Ether (ETH) increased 3.6%. However, they were no match for the altcoin rally that happened. Below are the top gainers and losers among the 80 largest cryptocurrencies by market capitalization.

THORChain (RUNE) rallied after enabling synthetic tokens on March 10. Those derivatives are pegged to the value of other underlying collateralized assets. In THORChain's version, the project has opted to back its synths with 50% of the underlying asset and 50% in RUNE.

Privacy tokens ZCash (ZEC) and Monero (XMR) rallied as United States President Joe Biden signed an executive order on March 9 focused on establishing a regulatory framework for crypto — mentioning its possible role in circumventing sanctions.

Lastly, Terra (LUNA) rallied after Terraform Labs donated $1.1 billion to Luna Foundation Guard's (LFG) reserves on March 11. LFG was launched in January as part of a broader effort to grow the Terra ecosystem and improve the sustainability of the network's stablecoins.

On the other hand, Fantom (FTM) led the worst performers after prominent Fantom Foundation team members Andre Cronje and Anton Nell announced their departure.

Meanwhile, Celo (CELO) suffered a hack on its third-party email service on March 10. A phishing communication was sent to all of its 25,741 users, but the attack was quickly investigated, and the Celo Foundation posted alerts across its social channels.

Tether premium indicates resilience from retail

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

Excessive buying demand tends to pressure the indicator above fair value, which is 100%. On the other hand, Tether's market offer is flooded during bearish markets, causing a 4% or higher discount.

Currently, the Tether premium stands at 100.7%, which is neutral. Still, there has been a consistent improvement over the past two months. This data signals that retail demand is picking up, which is positive considering that the total cryptocurrency capitalization dropped 50% between Jan. 1 and March 14.

Funding rates show a lack of excitement

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Perpetual futures are retail traders' preferred derivatives because their price tends to track regular spot markets perfectly.

Seven-day *accumulated perpetual futures funding rate on March 14. Source: Coinglass*

Notice how the accumulated seven-day funding rate is uneventful in most cases. Such data indicates a balanced leverage demand between longs (buyers) and sellers (shorts).

For example, Polkadot's (DOT) negative 0.30% weekly rate equals 1.2% per month, which is not a burden for traders building futures' positions. Typically, when there's an imbalance caused by excessive pessimism, that rate can easily surpass 5% per month.

Some might say that the third failure to sustain Bitcoin prices above $42,000 was the nail in the coffin for the bulls, as the cryptocurrency failed to display strength during a period of global macroeconomic uncertainty and a massive commodities rally.

Still, there are no signs of bearishness from Asian retail traders, as measured by the CNY Tether premium, and there is no indication of pressure from leverage shorts (sellers) on futures markets.

Bitcoin derivatives metrics reflect traders’ neutral sentiment, but anything can happen

March 11, 2022 Coin Telegraph

basis

BTC price is caught in the middle of a game of tug-o-war, as evidenced by the fact that pro traders are equally pricing upside and downside risk instruments.

Bitcoin's (BTC) last daily close above $45,000 was 66 days ago, but more importantly, the current $39,300 level was first seen on Jan. 7, 2021. The 13 months of boom and bust cycles culminated with BTC price hitting $69,000 on Nov. 10, 2021.

It all started with the VanEck spot Bitcoin exchange-traded fund being rejected by the United States Securities and Exchange Commission (SEC) on Nov. 12, 2020. Even though the decision was largely expected, the regulator was harsh and direct on the rationale backing the denial.

Curiously, nearly one year later, on Nov. 10, 2021, cryptocurrency markets rallied to an all-time high market capitalization at $3.11 trillion right as U.S. inflation as measured by the CPI index hit 6.2%, a 30-year high.

Inflation also had negative consequences on risk markets, as the U.S. Federal Reserve acknowledged on Nov. 30, 2021, that inflation is more than just a "transitory" problem and hinted that tapering could occur sooner than expected.

More recently, on March 10, the U.S. Senate passed a $1.5 trillion package, which now awaits President Joe Biden's signature. The new money is the first budget increase since former President Donald Trump left office.

Data shows pro traders are not willing to hold leveraged longs

To understand how professional traders are positioned, including whales and market makers, let's look at Bitcoin's futures and options market data. 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 12% to compensate traders for "locking in" the money for two to three months until the contract expiry. Levels below 5% are extremely bearish, while the numbers above 12% indicate bullishness.

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

The above chart shows that this metric dipped below 5% on Feb. 11 and hasn't yet shown signs of confidence from pro traders.

Still, one would not be wrong in assessing that an eventual break of the $44,500 resistance would catch those investors off guard, creating a strong buying activity to cover short positions.

Options traders are less worried about further downside risk

Currently, Bitcoin seems pretty undecided near $40,000, making it difficult to discern a direction in the market. The 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

If those traders fear a Bitcoin 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.

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

As displayed above, from Feb. 28 until March 8, the skew indicator ranged between 7% and 11%. Albeit not precisely signaling fear, these option traders were overcharging for downside protection by a wide margin.

The past three days showed a remarkable improvement and currently, the 4% delta skew shows more of a balanced situation. From the BTC options markets perspective, there's a similar risk for unexpected upward and downward price swings.

The mixed data from Bitcoin derivatives offer an interesting opportunity for bulls. The cheap futures premium offers long leverage opportunities at a relatively low cost and the downside protection is running at its lowest level in thirty days.

Ethereum traders reduce their bullish bets as ETH struggles reclaim $3K

March 8, 2022 Coin Telegraph

Ethereum traders reduce their bullish bets as ETH struggles reclaim K

basis

ETH price is stuck in a rut and these three metrics suggest the downtrend is nowhere near an end.

Ether (ETH) is still in troubled waters after failing to break a five-week-long descending channel top for the third time in a row. The March 2 test of the $3,000 resistance was followed by a 17.5% correction in five days, which signals that buyers are somewhat reluctant to defend the price.

To date, Ether suffers from high network transaction fees, even though it dropped from $19 in mid-February to the current $13 per transaction. While this is less than peaks seen previously, $13 per transaction is still incompatible with most games, nonfungible token and even decentralized finance transactions.

*Ether/USD price at FTX. Source: TradingView*

Even more worrisome than Ether's performance has been the total value locked (TVL) in Ethereum declining by 55% on March 8. Data shows the percentage of assets locked in its smart contracts reached an all-time low versus competitors.

This indicator could partially explain why Ether has been in a down-trend since early February. But, more importantly, one needs to analyze how professional traders are positioning themselves and there's no better gauge than derivatives markets.

The futures premium has flatlined

To understand whether the current bearish trend reflects top traders' sentiment, one should analyze Ether’s futures contracts premium, which is also known as a "basis." Unlike a perpetual contract, these fixed-calendar futures do not have a funding rate, so their price will differ vastly from regular spot exchanges.

By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market. Conversely, bearish sentiment tends to cause the three-month futures contract to trade at a 5% or lower annualized premium (basis).

On the other hand, a neutral market should present a 5% to 15% basis, reflecting market participants' unwillingness to lock in Ether for cheap until the trade settles.

*Ether 3-month futures premium. Source: laevitas.ch*

The above chart shows that Ether‘s futures premium has bottomed on Feb. 28 near 1.5%, a level typically associated with moderate pessimism. Despite the slight improvement to the current 3% basis, futures market participants are reluctant to open leverage long (buy) positions.

Long-to-short data confirms the lack of excitement

The top traders' long-to-short net ratio excludes externalities that might have impacted the longer-term futures instruments. By analyzing these top clients' positions on the spot, perpetual and 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*

Curiously, when Ether's futures premium bottomed at 1.5% on Feb. 28, ETH's price was remarkably close to the current $2,600. Thus, it makes sense to compare the top traders' long-to-short ratio over this period.

Binance shows the same level of top traders Ether positions at 0.92 on Feb. 8 and March 8. However, these whales and market markers at Huobi and OKX effectively reduced their longs. For instance, the long-to-short ratio at Huobi declined from 1.07 to the current 1.00. Furthermore, OKX traders' current 1.47 ratio is smaller than 1.58 from eight days ago.

All the data points to further downside

From the perspective of the metrics discussed above, there is hardly any sense that Ether price will flip bullish in the short-term. The data suggests that pro traders are unwilling to add long positions, as expressed by the basis rate and long-to-short ratio.

Moreover, the TVL data does not back a strong usage indicator of Ethereum smart contracts. Losing ground to competitors, while constantly delaying the migration to a proof-of-stake solution is likely pulling investors’ attention away and making long investors feel uncomfortable.

Chicago Mercantile Exchange To Offer New Bitcoin (BTC) and Ethereum (ETH) Options Trading

March 3, 2022 The Daily Hodl

CME Group plans to launch micro-sized Bitcoin and Ether options

March 1, 2022 Coin Telegraph

bitcoin options

The futures options, expected to start trading on March 28, will come more than two years after the CME Group launched a BTC options trading product in January 2020.

Major derivatives marketplace Chicago Mercantile Exchange Group will launch options trading for its micro Bitcoin and Ether futures products.

In a Tuesday announcement, the CME Group said that subject to regulatory review, it plans to launch options contracts for its existing micro Bitcoin (BTC) and Ether (ETH) futures that will be 10% the size of the respective tokens. The futures options, expected to start trading on March 28, will come more than two years after the firm launched a BTC options trading product in January 2020 and more than four years since the group launched the first Bitcoin futures contract in December 2017.

“Building on the strength and liquidity of the underlying contracts, our micro-sized options will enable traders of all sizes to efficiently hedge market-moving events with greater precision and flexibility or fine-tune their cryptocurrency market exposure," said CME Group’s global head of equity and FX products, Tim McCourt.

Meet the newest additions to the CME Group Cryptocurrency product lineup ‒ Micro Bitcoin and Micro Ether options ‒ available for trading March 28. https://t.co/pPL9JRshkD
— CME Group (@CMEGroup) March 1, 2022

The micro Ether futures contract, which CME launched in December 2021, is sized at 0.1 ETH, while the Bitcoin futures contracts are sized at 0.1 BTC and have been trading since May 2021. According to the CME Group, the minimum block threshold for options are 10 contracts for micro BTC and 100 for micro ETH. Genesis Global Trading, Cumberland and Akuna Capital are expected to provide liquidity for the crypto investment vehicles.

The announcement came following the price of BTC rising more than 15% from the $38,000s to a 7-day high of $44,816. The ETH price experienced similar gains, moving to a two-week high above $3,000, according to data from Cointelegraph Markets Pro. The price movement could be related, in part, to the financial impacts of the Ukrainian war, which has resulted in speculation the Russian government may attempt to use digital assets to circumvent sanctions.

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

February 28, 2022 Coin Telegraph

2 key derivatives metrics signal that Bitcoin traders expect BTC to hold K

Arweave

The entire crypto market is green on Feb. 28, and derivatives metrics suggest that BTC's bullish reversal will flip $40,000 back to support.

Whenever Bitcoin (BTC) fails to break through important resistance levels, traders gain confidence and add to their altcoin positions. The logic is that, unless BTC drops significantly, these movements historically provide decent rewards for those shifting their portfolios toward higher risk.

*Bitcoin/USD at FTX. Source: TradingView*

In the past seven days, the aggregate market capitalization performance of the cryptocurrency market showed a modest 3% increase to $1.78 trillion. This number is roughly in line with the performance seen from Bitcoin, Ether (ETH) and BNB.

However, comparing the winners and losers among the top-80 coins provides skewed results. For instance, while the gainers captured a positive 24.9% move on average, the worst performers dropped by 5.9%.

Terra (LUNA) rallied 52% on the week after the nonprofit organization supporting the Terra blockchain ecosystem sold $1 billion worth of tokens on Feb. 22. Luna Foundation raised money from Three Arrows Capital and Jump Crypto, a trading group that earlier assisted Solana's Wormhole cross-bridge platform by replenishing their stolen $300 million in Ether.

On Feb. 21, WAVES gained 50.7% after announcing a partnership with Allbridge that makes the protocol cross-chain interoperable and supportive of the Ethereum Virtual Machine (EVM) and non-EVM chains like NEAR Protocol, Solana (SOL) and Terra (LUNA).

Arweave (AR) rallied 28.5% in seven days after Bundlr Network released a high-volume Twitter archiver tool on Feb. 21. The system allows users to store tweets and linked media directly onto Arweave's permanent storage.

Lastly, QuickSwap, the Uniswap (UNI) implementation on the Polygon network, became the largest decentralized exchange DEX protocol by volume, reaching a $40 million daily average in February. Uniswap (UNI) token gained 14.4% over the past seven days, while Polygon (MATIC) rallied 8.5%.

The Tether premium reflects low 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 trades and the official U.S. dollar currency.

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

Currently, the Tether premium stands at 100.3%, which is neutral. Still, there has been a consistent improvement in 2022. This data signals that retail demand is picking up, which is positive considering that the total cryptocurrency capitalization dropped 19% between Jan. 1 and Feb. 28.

Futures markets confirm a lack of "euphoria"

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.

Accumulated perpetual futures funding rate on Feb. 28. Source: Coinglass

As depicted above, the accumulated 7-day funding rate is slightly negative in most cases. This data indicates slightly higher demand from shorts (sellers), but it is insignificant. For example, Luna's negative 0.65% weekly rate equals 2.8% per month, a figure th is not too concerning for futures traders.

Had there been a relevant risk appetite from shorts, the rate would be above 1% per week or equivalent to 4.6% per month.

Perpetual futures are retail traders' preferred derivatives because their price tends to track regular spot markets perfectly. Therefore, despite the negative 19% crypto performance in 2022, the neutral Tether premium and the funding rate should be interpreted as positive.

Bitcoin traders say $34K was the bottom, but data says it’s too early to tell

February 25, 2022 Coin Telegraph

Bitcoin traders say K was the bottom, but data says it’s too early to tell

basis

Bitcoin traders say the bottom is in, but it’s important to also consider BTC’s correlation to equities markets.

Bitcoin (BTC) price traded down 23% in the eight days following its failure to break the $45,000 resistance on Feb. 16. The $34,300 bottom on Feb. 24 happened right after the Russian-Ukraine conflict escalated , triggering a sharp sell-off in risk assets.

While Bitcoin reached its lowest level in 30 days, Asian stocks were also adjusting to the worsening conditions, a fact evidenced by Hong Kong's Hang Seng index dropping 3.5% and the Nikkei also reached a 15-month low.

The first question one needs to answer is whether cryptocurrencies are overreacting compared to other risk assets. Sure enough, Bitcoin's volatility is much higher than traditional markets, running at 62% per year.

As a comparison, the United States small and mid-cap stock market index Russell 2000 holds a 30% annualized volatility. Meanwhile, as measured by the MSCI China index, Chinese equities stand at 32%.

*Bitcoin/USD (purple, left scale) vs. Hang Seng Index (blue) & Russell 2000 (orange)*

There is a high correlation between Bitcoin, the Hang Seng stock market and the U.S. Russell 2000 Index. A possible explanation is the U.S. Federal Reserve's tightening objectives. By reducing bond buybacks and threatening to increase the interest rates, the monetary authority has caused a "flight to safety" movement.

Despite the non-existent returns adjusted by the 7.5% inflation, investors often seek protection on cash U.S. dollar positions and Treasury ills. This is especially true during periods of extreme uncertainty.

Bitcoin futures traders are moderately bearish

To understand how professional traders are positioned, one should monitor Bitcoin derivatives. The Bitcoin futures' annualized premium should run between 5% to 12% to compensate traders for "locking in" the money for two to three months until the contract expiry.

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

Levels below 5% are extremely bearish, while an annualized premium above 12% indicates bullishness. As shown above, the futures premium dropped below 5% on Feb. 9, displaying a lack of confidence from professional traders.

Although the current 2.5% represents the lowest level since July 20, this date marked a reversal from a 74-day price correction. In fact, a 71% rally followed that event, confirming the thesis that the futures premium is a backward-looking indicator.

*Bitcoin/USD (blue) and 30-day correlation vs. Russell 2000 (purple). Source: TradingView*

Notice how Bitcoin’s correlation versus the Russell 2000 Index was relatively high on July 20. However, that situation quickly reversed as BTC initiated its rally, independent from traditional markets.

The bottom could be in, but uncertainty could lead to further downside

Similar to the futures premium, the correlation metric uses historical data, so it should not be used to predict trend reversals. Investors, particularly professional fund managers, tend to avoid high volatile assets during turbulent markets.

Understanding market psychology is essential for avoiding unexpected price swings. Therefore, as long as Bitcoin remains considered a risky asset by market participants, these short-term corrections should be the norm rather than the exception.

Therefore, it makes sense to wait for further decoupling signs before predicting a Bitcoin bottom.

futures

Tether premium indicates weak retail demand

Funding rates show undecided traders

Tether premium shows slight discomfort

Futures markets show mixed sentiment

Bitcoin mining up, retail interest down

Long-to-short data confirms lack of excitement

Can the triangle break to the upside?

Tether premium indicates resilience from retail

Funding rates show a lack of excitement

Data shows pro traders are not willing to hold leveraged longs

Options traders are less worried about further downside risk

The futures premium has flatlined

Long-to-short data confirms the lack of excitement

All the data points to further downside

The Tether premium reflects low retail demand

Futures markets confirm a lack of "euphoria"

Bitcoin futures traders are moderately bearish

The bottom could be in, but uncertainty could lead to further downside

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