“Cheap” Bitcoin (BTC) below $40,000? BTC derivatives at odds

Bitcoin (BTC) fell below the $40,000 support on April 18. Due to the 15% correction over the past two weeks, predictions now indicate that the price may fall to $30,000.

Meanwhile, regulatory uncertainty still prevails. In particular, it is worth highlighting the failure of the European regulatory proposals regarding identity checks and the fight against money laundering in “non-hosted” wallets. Since last week, exchanges have started demanding additional information from their users, which makes traders uneasy.

The proposal for a European regulation causes unrest

The Economic and Monetary Affairs Committee of the European Parliament voted to ban or restrict proof-of-work cryptocurrencies on March 14, but the proposed change was postponed.

Recently, cryptocurrency exchange Bitstamp informed its customers of the ongoing policy adjustments to the platform in an April 13 email. The exchange requested additional information.

Bitstamp now wants to know from users what their nationality is, where they were born and where their tax domicile is. In addition, the exchange requires documents proving the origin of the cryptocurrency and the annual income.

On April 14, the non-profit group Coin Center called the Securities and Exchange Commission’s March 18 amendments to the definition of “stock exchange” “unconstitutional hyperbole.” If the proposal becomes an SEC rule, it will likely require some decentralized platforms to register as an exchange.

It’s not all bad news for the industry, as more crypto-friendly names are now set to enter the US government.

On April 15, US President Joe Biden announced his intention to nominate law professor Michael Barr as vice chairman of the Federal Reserve Board.

Barr served on the advisory board of Ripple Labs from 2015 to 2017, then served as the Treasury Department’s assistant secretary for financial institutions under former President Barack Obama.

Let’s see how the dealers have positioned themselves. To do this, we analyze Bitcoin derivatives indicators.

Margin traders increasingly optimistic

With margin trading, investors can borrow cryptocurrencies to leverage their position to increase returns. For example, you can buy cryptocurrencies by borrowing Tether and making larger investments.

On the other hand, Bitcoin borrowers can only sell the cryptocurrency as they are betting on the price falling. Unlike futures, the balance between long and short margin positions is not always equal.

OKEx USDT/BTC margin trading, ratio. Source: OKEx

The chart above shows that traders have been borrowing more USD Tether (USDT) lately, with the ratio rising from 13 on March 14 to 17. The higher the indicator, the more confident professional traders are about the bitcoin rate.

It should be mentioned that on April 11 a level of 20 was reached. It was the highest level in six months and indicates optimism.

Bitcoin options show that fear reigns supreme

However, it became difficult to predict the market’s next move as Bitcoin gradually stagnated around $40,000 last week. Still, the 25% delta bias is a clear sign when arbitrage exchanges and market makers are overpricing upside or downside protection.

The 25% delta skew compares equivalent call (buy) and sell (sell) options. The indicator turns positive when “fear” prevails because the premium of protective put options is higher than that of call options.

30-day Bitcoin options, 25% delta spread: Source: Laevitas.ch

When traders fear a Bitcoin price crash, the skew indicator rises above 8%. If you expect prices to rise, the asymmetry indicator drops to -8%.

As mentioned above, on April 8, the indicator was at 8%, which means “fear”. Before that, he was in the neutral zone for 30 days. As Bitcoin fell below $43,000, the 25% delta bias turned bearish.

Despite the negative indicator seen on bitcoin options, margin trading data suggests that these arbitrage traders and market makers are confident that the drop below $40,000 won’t last long.

The margin ratio on OKX shows that professional traders have become even more optimistic after a 15% increase in the BTC price in 14 days. That should be a consolation for those who are currently in the red.

However, bearish put options that trade at a premium should also not be ignored. This indicates that the probability of a decline is still high. So sometimes it’s better to just sit back and wait for more clarity on the price action.

The views and opinions expressed herein are solely those of authors and do not necessarily reflect the views of Cointelegraph. Every stage of investing and trading involves risk. Research well before making a decision.

Subscribe to our social networks so you don’t miss a thing: Twitter and Telegram – News, analysis, expert opinions and topical interviews with a focus on the DACH region.

Leave a Comment