Bitcoin derivatives data points to traders’ $50K BTC price target

December 12, 2023 Coin Telegraph

<div>Bitcoin derivatives data points to traders' K BTC price target</div>

Bitcoin bulls expectations of $50,000 and higher remain feasible according to BTC futures and options markets.

Bitcoin (BTC) price continues to trade below its 2023 high, a sign that investors may have underestimated the strength of the $44,000 resistance. Even as BTC price trades below $42,000, it doesn't necessarily mean that reaching $50,000 and beyond is no longer possible. In fact, quite the opposite seems more likely to occur. Looking at Bitcoin derivatives metrics, it is clear that traders ignored the 6.9% drop and remained optimistic. However, is this optimism enough to justify further gains?

The $127 million liquidation of leveraged long Bitcoin futures on Dec. 11 may seem significant in absolute terms, but it represents less than 1% of the total open interest – the value of all outstanding contracts. Nevertheless, it's undeniable that the liquidation engine triggered a 7% correction in less than 20 minutes.

On one hand, one could argue that derivatives markets played a crucial role in the recent negative price movement. However, this analysis overlooks the fact that after hitting a low of $40,200 on Dec. 11, Bitcoin's price increased by 4.2% in the following six trading hours. In essence, the impact of forceful liquidation orders had dissipated long ago, disproving the notion of a crash solely driven by futures markets.

Bitcoin derivatives traders target $40K BTC price now that Binance is resolved

November 22, 2023 Coin Telegraph

Binance

BTC futures and options held firm despite a wave of negative news, and data shows traders targeting $40,000.

The cryptocurrency market recently experienced events that were previously expected to present a severe negative price impact, and yet, Bitcoin (BTC) trades near $37,000 on Nov. 22, which is essentially flat from three days prior.

Such performance was utterly unexpected given the relevance of Binance’s plea deal on Nov. 21 with the United States Authorities for violating laws involving money laundering and terror financing.

Bearish news has had limited impact on Bitcoin price

One might argue that entities have been manipulating Bitcoin’s price to avoid contagion, possibly involving the issuing of unbacked stablecoins–especially those with direct ties to the exchanges suffering from the regulatory pressure. Thus, to identify whether investors became highly risk-averse one should analyze Bitcoin derivatives instead of focusing solely on the current price levels.

The U.S. government filed indictments against Binance and Changpeng "CZ" Zhao in Washington state on Nov. 14, but the documents were unsealed on Nov. 21. After admitting the offenses, CZ stepped away from Binance management as part of the deal. Penalties totaled over $4 billion, including fines imposed on CZ personally. The news triggered a mere $50 million in BTC leverage long futures contracts after Bitcoin’s price momentarily traded down to $35,600.

It is worth noting that on Nov. 20 the United States Securities and Exchange Commission (SEC) sued Kraken exchange, alleging it commingled customer funds and failed to register with the regulator as a securities broker, dealer and clearing agency. Additionally, the complaint claimed Kraken paid for operational expenses directly from accounts containing customer assets. However, Kraken said the SEC’s commingling accusations were previously earned fees, so essentially their proprietary assets.

Another potentially disastrous tidbit of news came from Mt. Gox, a now-defunct Bitcoin exchange that lost 850,000 BTC to a hack in 2014. Nobuaki Kobayashi, the Mt. Gox trustee announced on Nov. 21 the redemption of $47 million in trust assets and reportedly planned to start the first cash repayments to creditors in 2023. Even though there was no information regarding the sale of Bitcoin assets, investors speculated that this final milestone is closer than ever.

One will find posts on social networks from experienced traders and analysts that anticipated a crypto market crash in case Binance were to be indicted by the DoJ. Some examples are listed below, and it is safe to say such a theory was almost a consensus among investors.

ETF denied, slow bleed is most likely, with a switch to hard crash if DOJ charges are unsealed soon against Binance.
— Parrot Capital (@ParrotCapital) August 26, 2023

I do not believe in coincidences. The Universe is rarely so lazy.

Expecting ETFs to be rejected and DoJ to drop the hammer on Binance crushing bulls dreams for 2023.
— McKenna (@Crypto_McKenna) July 31, 2023

Notice how McKeena predicted that Binance would be indicted by the DoJ and further added that the ongoing Bitcoin spot exchange-traded (ETF) fund applications will be denied by the SEC. But, as counterintuitive as it might sound, Binance going fully compliant increases the odds of the spot ETF approval. This is because it greatly weakens the SEC’s main argument for previous denials, namely the excessive volume market share on unregulated exchanges.

Nothing concrete came out from the spot Bitcoin ETF in regards to recent regulatory actions, but the amends to multiple proposals is a hint of a healthy discussion with the SEC.

Bitcoin derivatives display resilience

To confirm if the Bitcoin price resilience aligns with professional investors' risk assessment, one should analyze BTC futures and options metrics. For instance, traders could have rushed to hedge their positions, which doesn't pressure the spot markets, but vastly impacts BTC futures premium and options pricing.

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

The price of Bitcoin monthly futures contracts tend to differ from regular spot exchanges since participants demand more money to delay the settlement. That’s not exclusive to cryptocurrencies, and in a neutral market it should stand near an annualized 5% rate.

Notice how Bitcoin futures currently holds an 8% premium, which is an indication of excessive demand for leverage longs, but far from excessive. This level is lower than the 11.5% seen in mid November, but is quite positive given the recent regulatory newsflow.

To confirm if Bitcoin derivatives did not experience a huge inflow of hedge operations, one needs to analyze BTC option markets as well. The 25% delta skew is a telling sign when arbitrage desks and market makers overcharge for upside or downside protection.

When traders anticipate a drop in Bitcoin’s price, the delta 25% skew tends to rise above 7%, while periods of excitement typically see it dip below negative 7%.

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

As displayed above, the options 25% delta skew indicates optimism for the past 4 weeks as the put (sell) options have been trading at a discount when compared with similar call (buy) options. More importantly, the recent news flow did not change professional traders’ appetite for hedging strategies.

Overall, there's no doubt that the impact of regulatory actions and the potential sell pressure from Mt Gox caught the market in a great mood given the derivatives indicators.

Additionally, the liquidation of $70 million leverage BTC longs reduced the pressure from future negative price oscillations, meaning even if price revisits $35,000, there's no indication of excessive optimism.

Since the final round of ETF decisions is scheduled for January and February, there's little incentive for Bitcoin bears to pressure the market while negative news had zero impact. Ultimately, the path to $40,000 becomes more certain.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ethereum price hits 6-month high amid BlackRock spot ETF buzz, but where’s the retail demand?

November 9, 2023 Coin Telegraph

blackrock

ETH price finally polevaulted the $2,000 resistance, but will retail demand and network use support the current bullish momentum?

Ether (ETH) experienced a surprising 8% rally on Nov. 9, breaking the $2,000 barrier and achieving its highest price level in six months. This surge, triggered by news of BlackRock registering the iShares Ethereum Trust in Delaware, resulted in $48 million worth of liquidations in ETH short futures. The initial announcement was made by @SummersThings on a social network, later confirmed by Bloomberg ETF analysts.

The iShares Ethereum Trust has just been registered in Delaware.

For context, BlackRock's iShares Bitcoin Trust was registered in a similar manner 7 days before they filed the ETF application with the SEC. Details below.

[announcement: I’m moving to @SynopticCom soon] pic.twitter.com/IYafIaxMzA
— Summers (@SummersThings) November 9, 2023

The news fueled optimistic expectations regarding a potential Ether spot ETF filing by BlackRock, a $9 trillion asset manager. This speculation follows BlackRock's iShares Bitcoin Trust registry in Delaware in June 2023, a week prior to their initial spot Bitcoin ETF application. However, with no official statement from BlackRock, investors may have jumped the gun, though the sheer influence of the asset manager in traditional finance leaves those betting against Ether's success in a precarious position.

Professional traders placed bullish ETH bets using derivatives

To understand how professional traders are positioned after the surprise rally, one should analyze the ETH derivatives metrics. Normally, Ether monthly futures trade at a 5%–10% annualized premium compared to spot markets, indicating that sellers demand additional money to postpone settlement.

*Ether 2-month futures premium. Source: Laevitas*

The Ether futures premium, jumping to 9.5% on Nov. 9, marked the highest level in over a year and broke above the 5% neutral threshold on Oct. 31. This shift ended a two-month bearish period and low demand for leveraged long positions.

To assess whether the break above $2,000 has led to excessive optimism, traders should examine the Ether options markets. When traders anticipate a drop in Bitcoin’s price, the delta 25% skew tends to rise above 7%, while periods of excitement typically see it dip below negative 7%.

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

The Ether options 25% delta skew shifted from neutral to bullish on Oct. 31, and the current -13% skew is the lowest in over 12 months, but far from being overly optimistic. Such a healthy level has been the norm for the past 9 days, meaning Ether investors were anticipating the bullish momentum.

There’s little doubt that Ether bulls got the upper hand regardless of the spot ETF narrative as ETH rallied 24% before the BlackRock news, between Oct. 18 and Nov. 8. This price action reflects a higher demand for Ethereum network, as reflected by the top decentralized applications (DApps) 30-day volumes.

*Ethereum network DApps volume rank. Source: DappRadar*

Still, when analyzing the broader cryptocurrency market structure, especially the retail indicators, there’s some inconsistency with the surging optimism and demand for leverage using Ether derivatives.

Retail indicators point to dormant demand for ETH and cryptocurrencies

For starters, the Google searches for “Buy Ethereum”, “Buy ETH” and “Buy Bitcoin” have been stagnant for the past week.

*Search trend for buying Ether and cryptocurrency-related terms. Source: Google Trends*

One might argue that retail traders typically lag the bull runs, usually entering the cycle a couple of days or weeks after major price marks and 6-month high have been hit. However, there has been a declining demand for cryptocurrencies, when using stablecoins premium as a gauge for Chinese crypto retail trader activity.

The stablecoin premium measures the difference between China-based peer-to-peer USD Tether (USDT) 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, causing a 2% or higher discount.

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

Currently, the Tether premium on OKX stands at 100.9%, indicating a balanced demand from retail investors. Such a level contrasts with the 102% from Oct. 13, for instance, before the crypto total market capitalization jumped 30.6% until Nov. 9. That goes on to show that Chinese investors are yet to present an excessive demand for fiat-to-crypto conversion using stablecoins.

In essence, Ether’s rally above $2,000 seems to have been driven by derivatives markets and the expectation of a spot ETF approval. The lack of retail demand is not necessarily an indicator of impending correction. However, the hype around BlackRock's Ethereum Trust registry, coupled with excessive leverage longs in ETH derivatives, raises concerns, putting the $2,000 support level to the test.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum futures premium hits 1-year high — Will ETH price follow?

November 1, 2023 Coin Telegraph

Aptos

ETH rallied alongside Bitcoin as new spot ETF news emerged, and the altcoin could benefit from the failure of its layer-1 competitors.

Ether (ETH) price has declined by 14.7% since its peak at $2,120 on April 16, 2023. However, two derivatives metrics indicate that investors have not felt this bullish in over a year. This discrepancy warrants an investigation into whether the recent optimism is a broader response to Bitcoin (BTC) breaking above $34,000 on Oct. 24.

One possible reason for the surge in enthusiasm among investors using ETH derivatives is the overall market's excitement regarding the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. According to analysts from Bloomberg, the ongoing amendments to the spot Bitcoin ETF proposals can be seen as a “good sign” of progress and impending approvals. This development is expected to drive the entire cryptocurrency market to higher price levels.

Interestingly, comments issued by the U.S. SEC Chair Gery Gensler's in 2019 reveal his perspective. During the 2019 MIT Bitcoin Expo, Gensler termed the SEC's position at the time as "inconsistent" because they had denied multiple spot Bitcoin ETF applications, while futures-based ETF products that do not involve physical Bitcoin had been in existence since December 2017.

Another potential factor in the optimism of Ethereum investors using derivatives may be the pricing of the Dencun upgrade scheduled for the first half of 2024. This upgrade is set to enhance data availability for layer-2 rollups, ultimately leading to reduced transaction costs. Moreover, the upgrade will prepare the network for the future implementation of sharding (parallel processing) as part of the blockchain's "Surge" roadmap.

Ethereum co-founder Vitalik Buterin highlighted in his Oct. 31 statement that independent layer-1 projects are gradually migrating and potentially integrating as Ethereum ecosystem layer-2 solutions. Buterin also noted that the current costs associated with rollup fees are not acceptable for most users, particularly for non-financial applications.

Challenges for Ethereum competitors

Ethereum competitors are facing challenges as software developers realize the associated costs of maintaining a complete record of a network's transactions. For instance, SnowTrace, a popular blockchain explorer tool for Avalanche (AVAX), announced its shutdown supposedly due to the high costs.

Phillip Liu Jr., head of strategy and operations at Ava Labs, pointed out the difficulties users face in self-validating and storing data on single-layer chains. Consequently, the substantial processing capacity required often leads to unexpected issues.

For example, on October 18, the Theta Network team encountered a "edge case bug" after a node upgrade, causing blocks on the main chain to halt production for several hours. Similarly, layer-1 blockchain Aptos Network (APT) experienced a five-hour outage on October 19, resulting in a halt in exchanges' deposits and withdrawals.

In essence, the Ethereum network may not currently offer a solution to its high fees and processing capacity bottlenecks. Still, it does have an eight-year track record of continuous upgrades and improvements toward that goal with few major disruptions.

Assessing bullish sentiment in ETH derivatives markets

After evaluating the fundamental factors surrounding the Ethereum network, it's essential to investigate the bullish sentiment among ETH traders in the derivatives markets, despite the negative performance of ETH, which has dropped 14.7% since its $2,120 peak in April.

The Ether futures premium, which measures the difference between two-month contracts and the spot price, has reached its highest level in over a year. In a healthy market, the annualized premium, or basis rate, should typically fall within the range of 5% to 10%.

*Ether 1-month futures basis rate. Source: Laevitas.ch*

Such data is indicative of the growing demand for leveraged ETH long positions, as the futures contract premium surged from 1% on Oct. 23 to 7.4% on Oct. 30, surpassing the neutral-to-bullish threshold of 5%. This surge in the metric follows a 15.7% rally in ETH's price over two weeks.

Analyzing the options markets provides further insight. The 25% delta skew in Ether options is a useful indicator of when arbitrage desks and market makers overcharge for upside or downside protection. When traders anticipate a drop in Ether's price, the skew metric rises above 7%. Conversely, phases of excitement tend to exhibit a negative 7% skew.

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

Notice how the Ether options 25% delta skew reached a negative 16% level on Oct. 27, the lowest in over 12 months. During this period, protective put (sell) options were trading at a discount, a characteristic of excessive optimism. Moreover, the current 8% discount for put options is a complete turnaround from the 7% or higher positive skew that persisted until Oct. 18.

In summary, the drivers behind the bullish sentiment among Ether investors in derivatives markets remain somewhat elusive. Traders may be expecting approval for Ether spot ETF instruments following Bitcoin's potential approval, or they may be banking on planned upgrades that aim to reduce transaction costs and eliminate the competitive advantage of other blockchain networks like Solana (SOL) and Tron (TRX).

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin options data highlights traders’ belief in further BTC price upside

October 30, 2023 Coin Telegraph

Coin Telegraph

Open interest on Bitcoin options recently hit a year-to-date high, but what is fueling this newfound bullish sentiment?

The recent gains are a rare sight in 2023, even considering Bitcoin's impressive 108% year-to-date performance. Notably, the last instance of such price action occurred on March 14 when Bitcoin surged from $20,750 to $26,000 in just two days, marking a 25.2% price increase.

*Deribit BTC options daily volume, in BTC. Source: Deribit*

It's worth noting the significance of the fact that a staggering 208,000 contracts changed hands in a mere two days. To put this into perspective, the prior peak, which occurred on August 18, saw a total of 132,000 contracts exchanged, but that was during a period when Bitcoin's price plummeted by 10.7% from $29,090 to $25,980 in just two days. Interestingly, Bitcoin's options open interest, which measures outstanding contracts for every expiry, reached its highest level in over 12 months on Oct. 26.

This surge in activity has led some analysts to emphasize the potential "gamma squeeze" risk. This theoretical analysis seeks to capture the need for option market makers to cover their risk based on their likely exposure.

the #bitcoin gamma squeeze from last week could happen again

if BTCUSD moves higher to $35,750-36k, options dealers will need to buy $20m in spot BTC for every 1% upside move, which could cause explosiveness if we begin to move up towards those levels

more pic.twitter.com/OA9tJ0ZaK9
— Alex Thorn (@intangiblecoins) October 30, 2023

According to estimates from Galaxy Research and Amberdata, BTC options market makers may need to cover $40 million for every 2% positive move in Bitcoin's spot price. While this number may seem substantial, it pales in comparison to Bitcoin's staggering daily adjusted volume of $7.8 billion.

Another aspect to consider when assessing Bitcoin options volume and total open interest is whether these instruments have primarily been used for hedging purposes or neutral-to-bullish strategies. To address this ambiguity, one should closely monitor the demand difference between call (buy) and put (sell) options.

*Bitcoin options put-to-call volume ratio. Source: Laevitas.ch*

Notably, the period from Oct. 16 to Oct. 26 saw a predominance of neutral-to-bullish call options, with the ratio consistently remaining below 1. Consequently, the excessive volume observed on Oct. 23 and 24 was skewed towards call options.

However, the landscape changed as investors increasingly sought protective put options, reaching a peak of 68% higher demand on Oct. 28. More recently, the metric shifted to a neutral 1.10 ratio on Oct. 30, indicating a balanced demand between put and call options.

How confident are Bitcoin option traders?

To gauge whether investors using options have grown more confident as Bitcoin's price held above $34,000 on Oct. 30, one should analyze the Bitcoin options delta skew. When traders anticipate a drop in Bitcoin's price, the delta 25% skew tends to rise above 7%, while periods of excitement typically see it dip below negative 7%.

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

The Bitcoin options' 25% delta skew shifted to a neutral position on Oct. 24 after residing in bullish territory for five consecutive days. However, as investors realized that the $33,500 support level proved more resilient than anticipated, their confidence improved on Oct. 27, causing the skew indicator to re-enter the bullish zone below negative 7%.

Extraordinary options premiums and continued optimism

Two noteworthy observations emerge from this data. Bitcoin bulls utilizing options contracts prior to the 17% rally that began on Oct. 23 were paying the highest premium relative to put options in over 12 months. A negative 18% skew is highly uncommon and signifies extreme confidence or optimism, likely fueled by expectations of the spot Bitcoin ETF.

What stands out most, however, is the present negative 13% skew after Bitcoin's price surged by 26.7% in the 15 days leading up to Oct. 27. Normally, investors would seek protective puts to hedge some of their gains, but this did not occur. Consequently, even if the initial demand for call options was primarily driven by ETF expectations, the prevailing optimism has endured as Bitcoin soared above $34,000.

Bitcoin (BTC) options volumes experienced a significant surge on Oct. 23 and Oct. 24, marking the highest level in over six months. This activity coincided with a remarkable 17% BTC price rally over two days. Traders are now pondering whether the increased activity in the BTC options market can be solely attributed to the anticipation of a Bitcoin spot exchange-traded fund (ETF) or if the optimism has dwindled following the recent price surge above $34,000.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Uptober might be over: Bitcoin price data shows investor sentiment at 3-month low

October 12, 2023 Coin Telegraph

basis

Bitcoin price has corrected at each attempt to rally above $28,000. Cointelegraph explains why.

Bitcoin (BTC) faced a 4.9% correction in the four days following the failure to break the $28,000 resistance on Oct. 8, and derivatives metrics show fear is dominating sentiment in the market, but will it be enough to shake Bitcoin price from its current range?

Looking at the bigger picture, Bitcoin is holding up admirably, especially when compared to gold, which has fallen by 5% since June, and Treasury Inflation-Protected bonds (TIP), which have seen a 4.2% drop during the same period. Merely maintaining its position at $27,700, Bitcoin has outperformed two of the most secure assets in traditional finance.

Given Bitcoin’s price rejection at $28,000 on Oct. 8, investors should analyze BTC derivatives metrics to determine whether bears are indeed in control.

*Bitcoin/USD vs. inflation-protected TIP ETF vs. Gold. Source: TradingView*

Treasury Inflation-Protected Securities are U.S. government bonds designed to safeguard against inflation. Consequently, the ETF's value tends to rise with increasing inflation since the bond principal and interest payments adjust to inflation, preserving the purchasing power for investors.

$27,600 Bitcoin is not necessarily a bad thing

Regardless of how you frame this historic achievement, Bitcoin enthusiasts may not be entirely satisfied with its current $520 billion market capitalization, even though it surpasses global payment processor Visa's ($493 billion) and Exxon Mobil's ($428 billion) market capitalizations. This bullish expectation is partly based on Bitcoin's previous all-time high of $1.3 trillion in November 2021.

It's important to note that the DXY index, which measures the U.S. dollar against a basket of foreign currencies, including the euro, Swiss Franc and British Pound, is nearing its highest level in 10 months. This indicates a strong vote of confidence in the resilience of the U.S. economy, at least in relative terms. This alone should be enough to justify reduced interest in alternative hedge instruments like Bitcoin.

Some may argue that the 3% gains in the S&P 500 index since June contradict the idea of investors seeking cash positions. However, the top 25 companies hold a combined $4.2 trillion in cash and equivalents, in addition to being highly profitable. This explains why stocks are also being used as a hedge rather than a risk-seeking venture.

In essence, there is no reason for Bitcoin investors to be dissatisfied with its recent performance. However, this sentiment changes when we analyze BTC derivatives metrics.

Bitcoin derivatives show declining demand from bulls

To begin with, Bitcoin's future contract premium, also known as the basis rate, reached its lowest level in four months. Normally, Bitcoin monthly futures trade at a slight premium compared to spot markets, indicating that sellers demand additional money to postpone settlement. As a result, futures contracts in healthy markets should trade at an annualized premium of 5% to 10%, a situation not unique to crypto markets.

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

The current 3.2% futures premium (basis rate) is at its lowest point since mid-June, before BlackRock filed for a spot ETF. This metric indicates a reduced appetite for leverage buyers, although it doesn't necessarily reflect bearish expectations.

To determine whether the rejection at $28,000 on Oct. 8 has led to decreased optimism among investors, traders should examine Bitcoin options markets. The 25% delta skew is a telling indicator, especially when arbitrage desks and market makers overcharge for upside or downside protection.

If traders anticipate a drop in Bitcoin's price, the skew metric will rise above 7%, and periods of excitement tend to have a negative 7% skew.

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

As shown above, the Bitcoin options' 25% delta skew switched to "fear" mode on Oct. 10, with protective put (sell) options currently trading at a 13% premium compared to similar call (buy) options.

Bitcoin derivatives metrics suggest that traders are becoming less confident, which can be partly attributed to the multiple postponements of the Bitcoin spot ETF decisions by the U.S. Securities and Exchange Commission, and concerns regarding exchanges' exposure to terrorist organizations.

For now, the negative sentiment toward cryptocurrencies seems to invalidate any benefits arising from macroeconomic uncertainty and the natural hedge protection provided by Bitcoin's predictable monetary policy. At least from a derivatives perspective, the likelihood of Bitcoin's price breaking above $28,000 in the short term appears slim.

3 key Ethereum price metrics suggest that ETH is gearing up for volatility

September 15, 2023 Coin Telegraph

Binance

Network, futures and user data all point toward Ethereum potentially charting a new course.

Ether (ETH) price has been dealing with some strong headwinds and on Sept. 11, the price of the altcoin endured a critical test when it plunged to the $1,530 support level. In the days that followed, Ether managed to stage an impressive recovery, by surging by 6%. This resurgence may signal a pivotal moment, following a month that had seen ETH endure losses of 16%.

Even with the somewhat swift recovery, Ether’s price performance raises questions among investors about whether it has the potential to climb back to $1,850, and ETH derivatives and network activity might hold the key to this puzzle.

*Ether/USD price index, 1-day. Source:* *TradingView*

Macroeconomic factors have played a significant role in mitigating investor pessimism given that inflation in the United States accelerated for the second consecutive month, reaching 3.7% according to the most recent CPI report. Such data reinforces the belief that the U.S. government's debt will continue to surge, compelling the Treasury to offer higher yields.

Scarce assets are poised to benefit from the inflationary pressure and the expansive monetary policies aimed at bridging the budget deficit. However, the cryptocurrency sector is grappling with its own set of challenges.

Regulatory uncertainty and high network fees limit investors’ appetite

There's the looming possibility of Binance exchange facing indictment by the U.S. Department of Justice. Furthermore, Binance.US has found itself entangled in legal battles with the U.S. Securities and Exchange Commission (SEC), leading to layoffs and top executives departing from the company.

Besides the regulatory hurdles faced by cryptocurrencies, the Ethereum network has witnessed a notable decline in its smart contract activity, which is at the core of its original purpose. The network still grapples with persistently high average fees, hovering above the $3 mark.

*Ethereum network dApps rank by active addresses. Source: DappRadar*

Over the past 30 days, the top Ethereum dApps have seen an average 26% decrease in the number of active addresses. An exception to this trend is the Lido (LDO) liquid staking project, which saw a 7% increase in its total value locked (TVL) in ETH terms during the same period. It's worth mentioning that Lido's success has been met with criticism due to the project's dominance, accounting for a substantial 72% of all staked ETH.

Vitalik Buterin, co-founder of Ethereum, has acknowledged the need for Ethereum to become more accessible for everyday people to run nodes in order to maintain decentralization in the long term. However, Vitalik does not anticipate a viable solution to this challenge within the next decade. Consequently, investors have legitimate concerns about centralization, including the influence of services like Lido.

ETH futures and options show reduced interest from leverage longs

A look at derivatives metrics will better explain how Ether’s professional traders are positioned in the current market conditions. Ether monthly futures typically trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 2-month futures annualized premium. Source: Laevitas.ch*

The premium for Ether futures hit its lowest point in three weeks, standing at 2.2%, indicating a lack of demand for leveraged long positions. Interestingly, not even the 6% gain following the retest of the $1,530 support level on Sept. 11 managed to push ETH futures into the 5% neutral threshold.

One should look at the options markets to better gauge market sentiment, as the 25% delta skew can confirm whether professional traders are leaning bearish. In short, if traders expect a drop in Bitcoin’s price, the skew metric will rise above 7%, while periods of excitement typically have a -7% skew.

On Sept. 14 the Ether 25% delta skew indicator briefly shifted to a bullish stance. This shift was driven by put (sell) options trading at an 8% discount compared to similar call (buy) options. However, this sentiment waned on Sept. 15, with both call and put options now trading at a similar premium. Essentially, Ether derivatives traders are displaying reduced interest in leverage long positions, despite the successful defense of the $1,530 price level.

On one hand, Ether has potential catalysts, including requests for a spot ETH exchange-traded fund (ETF) and macroeconomic factors driven by inflationary pressure. However, the dwindling use of dApps and ongoing regulatory uncertainties create a fertile ground for FUD. This is likely to continue exerting downward pressure on Ether's price, making a rally to $1,850 in the short to medium term appear unlikely.

Bitcoin derivatives data suggests BTC price holds the current range

September 12, 2023 Coin Telegraph

Bankruptcy

BTC investor sentiment turns increasingly bullish after this week’s quick rebound from a sharp price correction.

Bitcoin (BTC) experienced a 5% increase after testing the $25,000 support level on Sept. 11. However, this breakout rally doesn't necessarily indicate a victory for bulls. To put today’s price action in perspective, BTC has witnessed a 15% decline since July. In contrast, the S&P 500 index and gold have maintained relatively stable positions during this period.

This underperformance demonstrates that Bitcoin has struggled to gain momentum, despite significant catalysts such as Microstrategy's plan to acquire an additional $750 million worth of BTC and the multiple requests for Bitcoin spot ETFs from trillion-dollar asset management firms. Still, according to Bitcoin derivatives, bulls are confident that $25,000 marked a bottom and opened room for further price gains.

*Bitcoin/USD vs. gold and S&P 500 futures, 12-hour. Source: TradingView*

Some argue that Bitcoin's primary drivers for 2024 are still in play, specifically the prospects of a spot ETF and the reduction in supply following the April 2024 halving. Additionally, some of the cryptocurrency markets’ immediate risks have diminished following the U.S. Securities and Exchange Commission (SEC) experiencing partial losses in three separate cases involving Grayscale, Ripple and the decentralized exchange Uniswap.

On the other hand, bears have their own set of advantages, including the ongoing legal cases against leading exchanges like Binance and Coinbase. Moreover, there is the troubled financial situation of the Digital Currency Group (DCG) after one of its subsidiaries declared bankruptcy in January 2023. The group is burdened with debts exceeding $3.5 billion, potentially leading to the sale of funds managed by Grayscale, including the Grayscale Bitcoin Trust (GBTC).

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

Bitcoin futures and options metrics held steady despite the correction

Bitcoin monthly futures typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, BTC futures contracts should typically trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin 1-month futures annualized premium. Source: Laevitas.ch*

It's worth noting that the demand for leveraged BTC long and short positions through futures contracts did not have a significant impact on the drop below the $25,000 mark on Sept. 11. However, the BTC futures premium continues to hover below the 5% neutral threshold. This metric remains in the neutral-to-bearish range, indicating a lack of demand for leverage long positions.

To gauge market sentiment further, it’s also helpful to look at the options markets, as the 25% delta skew can assess whether the retest of the $25,000 has made investors more optimistic. In short, if traders expect a drop in Bitcoin’s price, the skew metric will rise above 7%, while periods of excitement typically have a negative 7% skew.

The situation underwent a notable shift on Sept. 11, as the 25% delta skew metric, which previously indicated a 9% premium on protective put options, suggesting investors were expecting a correction, has now leveled off at 0. This indicates a balanced pricing between call and put options, implying equal odds for both bullish and bearish price movements.

Macroeconomic uncertainty favors bears, but BTC bulls remain confident

Given the uncertainty on the macroeconomic front, particularly with the upcoming release of the inflation CPI report on Sept. 13 and retail sales data on Sept. 14, it's likely that crypto traders will be cautious and prefer a "return to the mean." In this context, the mean represents the predominant trading range of $25,500 to $26,200 observed over the past couple of weeks.

However, from a bullish perspective, the fact that derivatives markets held up during the dip below $25,000 is a promising sign. In other words, if bears had significant conviction, one would expect a stronger appetite for put options and a negative BTC futures premium, known as "backwardation."

Ultimately, both bulls and bears have significant triggers that could influence the price of Bitcoin, but predicting the timing of events such as court decisions and ETF rulings is challenging. This dual uncertainty likely explains why derivatives metrics have remained resilient, as both sides exercise caution to avoid excessive exposure.

Bitcoin futures data hints at $22K as the next logical step

September 4, 2023 Coin Telegraph

Bitcoin futures data hints at K as the next logical step

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BTC derivatives flipped bearish after Bitcoin failed to establish bullish momentum despite the heightened spot ETF prospects.

A Bitcoin (BTC) price correction down to $22,000 is becoming increasingly likely as BTC derivatives have begun to exhibit bearish tendencies.

The price chart of Bitcoin leaves little doubt that investor sentiment worsened after the much-hyped victory by Grayscale Asset Manager against the U.S. Securities and Exchange Commission (SEC) on Aug. 29 and the postponement of multiple spot BTC exchange-traded fund (ETF) requests by the SEC.

The central question remains whether the prospects of an ETF can outweigh the growing risks.

Spot Bitcoin ETF hype is fading

By Aug. 18, the entire 19% rally that occurred following BlackRock ETF initial filing had fully retracted as Bitcoin moved back to $26,000.

Next, there was a failed attempt to reclaim the $28,000 support as investors raised the odds of an ETF approval following the positive news on Grayscale Bitcoin Trust (GBTC) request.

*Bitcoin/USD price index, 1-day. Source: TradingView*

Cryptocurrency investors' morale deteriorated as the S&P 500 index closed at 4,515 on Sept. 1, merely 6.3% below its all-time high from January 2022. Even gold, which hasn't been able to break above the $2,000 level since mid-May, is 6.5% away from its all-time high. Consequently, the general feeling for Bitcoin's investors just 7 months ahead of its halving in 2024 is certainly less positive than expected.

Some analysts will pin Bitcoin's lackluster performance on the ongoing regulatory actions against the two leading exchanges, Binance and Coinbase. Moreover, multiple sources claim that the U.S. Department of Justice (DOJ) is likely to indict Binance in a criminal probe. The claims are based on allegations of money laundering and potential violations of sanctions involving Russian entities.

Moreover, multiple sources claim that the U.S. Department of Justice (DOJ) is likely to indict Binance in a criminal probe. The claims are based on allegations of money laundering and potential violations of sanctions involving Russian entities.

North Code Capital CIO and Bitcoin supporter Pentoshi expressed the current conditions in a social network post:

I think we still will eventually get some bearish Binance news vs DoJ. That should be seen as opportunity!

But overall. We also likely get ETF’s this year or early next year and $btc heading to 401k’s

Said it before but this is a year for accumulation. Don’t lose sight of the…
— Pentoshi euroPeng (@Pentosh1) September 1, 2023

According to Pentoshi, the potential gains from a spot ETF approval outweigh the price impact from the eventual regulatory actions against the exchanges. There's no way to ascertain whether such an assumption is valid, but such an analysis fails to consider that U.S. inflation, as measured by CPI, has come down to 3.2% in July 2023 from 9.1% in June 2022.

Moreover, the U.S. Federal Reserve's (Fed) total assets have been reduced to $8.12 trillion, down from the recent $8.73 peak in March 2023. This signals that the monetary authority has been draining liquidity from the markets, which is detrimental to Bitcoin's inflation protection thesis.

Looking at a longer time frame, Bitcoin's price has been holding the $25,000 level since mid-March, but taking a closer look at derivatives data shows that bulls' conviction is getting tested.

Bitcoin derivatives show decreasing demand from bulls

Bitcoin monthly futures typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, BTC futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

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

Bitcoin's current 3.5% futures premium (basis rate) is at its lowest point since mid-June, prior to BlackRock's filing for a spot ETF. This indicator reflects a decreased demand for leverage buyers utilizing derivative contracts.

Traders should also analyze options markets to understand whether the recent correction has caused investors to become less optimistic. The 25% delta skew is a telling sign when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.

As displayed above, the options' 25% delta skew has recently entered bearish territory, with protective put (sell) options trading at a 9% premium on Sep. 4 compared to similar call (buy) options.

BTC futures hint at $22,000 next

Bitcoin derivatives data suggests that the bearish momentum is gaining strength, especially since the approval of a spot ETF could potentially be deferred until 2024, given the SEC's concerns about the lack of measures to prevent a significant portion of trading occurring on unregulated offshore exchanges based on stablecoins.

Meanwhile, the uncertainty in the regulatory landscape does favor the bears as there's no way to dismiss the fear, uncertainty, and doubt (FUD) surrounding potential actions from the DOJ or the ongoing lawsuits against the exchanges by the SEC.

Ultimately, a retracement down to $22,000 — the level last seen when Bitcoin’s futures premium was 3.5% — is the most likely scenario, considering the recent inability to sustain a positive price momentum despite the heightened chances of a spot Bitcoin ETF approval.

Bitcoin price holds $26K as derivatives data hints at end of volatility spike

August 21, 2023 Coin Telegraph

Bitcoin price holds K as derivatives data hints at end of volatility spike

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BTC futures and options data show pro traders’ sentiment was not impacted despite last week’s 11.4% correction.

In the past few months, Bitcoin traders had grown used to less volatility, but historically, it’s not uncommon for the cryptocurrency to see price swings of 10% in just two or three days. The recent 11.4% correction from $29,340 to $25,980 between Aug. 15 and Aug. 18 took many by surprise and led to the largest liquidation since the FTX collapse in November 2022. But the question remains: Was this correction significant in terms of the market structure?

Certain experts point to reduced liquidity as the reason for the recent spikes in volatility, but is this truly the case?

BTC surged 70%+ in 2023, yet the "Alameda gap" - liquidity dip post FTX and Alameda Research collapse - remains, supported by low volatility.

Read full analysis here: https://t.co/kVslgLQtpL pic.twitter.com/g8Ac7udBl7
— Kaiko (@KaikoData) August 17, 2023

As indicated by the Kaiko Data chart, the decline of 2% in the Bitcoin (BTC) order book depth has mirrored the decrease in volatility. It’s possible that market makers adjusted their algorithms to align with the prevailing market conditions.

Hence, delving into the derivatives market to assess the impact of the drop to $26,000 seems reasonable. This examination aims to determine whether whales and market makers have become bearish or if they’re demanding higher premiums for protective hedge positions.

To begin, traders should identify similar instances in the recent past, and two events stand out:

*Bitcoin/USD price index, 2023. Source: TradingView*

The first decline took place from March 8 to March 10, causing Bitcoin to plummet by 11.4% to $19,600, marking its lowest point in over seven weeks at that time. This correction followed the liquidation of Silvergate Bank, a crucial operational partner for multiple cryptocurrency firms.

The subsequent significant move occurred between April 19 and April 21, resulting in a 10.4% drop in Bitcoin’s price. It revisited the $27,250 level for the first time in more than three weeks after Gary Gensler, the chair of the United States Securities and Exchange Commission, addressed the House Financial Services Committee. Gensler’s statements provided little reassurance that the agency’s enforcement-driven regulatory efforts would cease.

Not every 10% Bitcoin price crash is the same

Bitcoin quarterly futures generally tend to trade with a slight premium when compared to spot markets. This reflects sellers’ inclination to receive additional compensation in return for delaying the settlement. Healthy markets usually see BTC futures contracts being traded with an annualized premium ranging from 5 to 10%. This situation, termed “contango," is not unique to the cryptocurrency domain.

*Bitcoin 3-month futures premium, March/April 2023. Source: Laevitas*

Leading up to the crash on March 8, Bitcoin’s futures premium was at 3.5%, indicating a moderate level of comfort. However, when Bitcoin’s price dipped below $20,000, there was an intensified sense of pessimism, causing the indicator to shift to a discount of 3.5%. This phenomenon, referred to as "backwardation," is typical of bearish market conditions.

Conversely, the correction on April 19 had minimal impact on Bitcoin's futures main metric, with the premium remaining around 3.5% as the BTC price revisited $27,250. This could imply that professional traders were either highly confident in the soundness of the market structure or were well-prepared for the 10.4% correction.

The 11.4% BTC crash between Aug. 15 and Aug. 18, reveals distinct dissimilarities from previous instances. The starting point for Bitcoin’s futures premium was higher, surpassing the 5% neutral threshold.

*Bitcoin 3-month futures premium, August 2023. Source: Laevitas*

Notice how rapidly the derivatives market absorbed the shock on Aug. 18. The BTC futures premium swiftly returned to a 6% neutral-to-bullish position. This suggests that the decline to $26,000 did not significantly dampen the optimism of whales and market makers regarding the cryptocurrency.

Options markets confirm lack of bearish momentum

Traders should also analyze options markets to understand whether the recent correction has caused pro traders to become more risk-averse. In short, if traders anticipate a Bitcoin price drop, the delta skew metric will rise above 7%, and phases of excitement tend to have a -7% skew.

Data indicate excessive demand for call (buy) BTC options ahead of the Aug. 15 crash, with the indicator at -11%. This trend changed over the subsequent five days, though the metric remained within the neutral range and was unable to breach the 7% threshold.

Ultimately, both Bitcoin options and futures metrics reveal no signs of professional traders adopting a bearish stance. While this doesn’t necessarily guarantee a swift return of BTC to the $29,000 support level, it does reduce the likelihood of an extended price correction.

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