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Bitcoin bulls look to make $30,000 support, but options traders are unconvinced

 


What does the derivative data say? After failing to break above $31,000 on May 16, can bitcoin reclaim $30,000 or might it be further down?


Bitcoin price fluctuates due to regulatory concerns and situation around Terra

The Bitcoin course is under additional pressure because Luna Foundation Guard (LFG) has sold 99.6 percent of its BTC reserve. That was 80,081 BTC.


On May 16, LFG released details of its remaining crypto reserve. On the one hand, there is no longer any sell-off risk with this project, on the other hand, investors are questioning the stability of other stablecoins and their decentralized finance applications (DeFi).


FTX CEO Sam Bankman-Fried recently commented on the environmental and scalability issues with Proof-of-Work (PoW) mining. This further fueled the negative sentiment. According to Bankman-Fried, proof-of-stake (PoS) consensus is better suited to handle millions of transactions.


On May 14th, a British newspaper reported that the Treasury wanted to regulate stablecoins in the UK . A Treasury Department spokesman said the plan does not include legalizing algorithmic stablecoins. The focus here is on stablecoins that have a 1:1 link and are fully collateralised.


This news may have impacted market sentiment and BTC price, so let's take a look at the positioning of the larger traders in the futures and options markets.


Bitcoin futures premium resilient

The base rate measures the difference between longer-dated futures contracts and current spot prices. The annualized premium for bitcoin futures should be between 5 percent and 10 percent. This is a trader's compensation for "locking in" the money for two to three months until the contract expires. Levels below 5 percent are considered bearish, while levels above 10 percent indicate excessive demand from the longs (buyers).


In the chart above, Bitcoin's base rate fell below the neutral 5 percent threshold on April 6. But after the sell-off to $25,400 on May 12, there was no panic. It means that this indicator is slightly positive.


While the base rate suggests bearish sentiment, consider that Bitcoin is down 36 percent year-to-date and 56 percent below its all-time high of $69,000.


Options traders overwhelmed

The 25 percent delta skew on options is very useful as it shows when bitcoin arbitrage desks and market makers are overcharging for upside or downside protection.


If traders fear a collapse in the Bitcoin price, the skew rises to over 10 percent. If you expect a price increase, the skew falls to -10 percent.

Bitcoin 30-day options, 25 percent delta skew: Source: Laevitas

The skew surged above 10 percent on April 6, hitting the "fear" zone as options traders overcharged to hedge down. The current level of 19 percent is still negative and it recently hit 25.5 percent, the worst reading this indicator has ever recorded.


While Bitcoin's futures premium has held steady, the indicator is pointing to a lack of interest from leveraged buyers (longs). In short, BTC options markets are still tight, suggesting that professional traders are unconvinced that the current rising channel will hold.

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