Long Bitcoin bottom, or watch and wait? Bitcoin Traders Plan Their Next Move

Bitcoin (BTC) faced a 9% correction in the early hours of September 19 as the price traded at $18,270. Even though the price quickly rebounded above $19,000, this level was the lowest price seen in three months. However, professional traders held their ground and were not inclined to take the loss as measured by derivative contracts.

Bitcoin/USD price index, 2 hours. Source: Trading View

It is extremely difficult to determine the reason for the accident, but some say that US President Joe Biden’s interview on CBS’s “60 Minutes” raised concerns about the world war. When responding to the question of whether U.S. forces would defend Taiwan in the event of a Chinese-led invasion, Biden replied, “Yes, if in fact there was an unprecedented attack.”

Others cite China’s central bank lowering the cost of borrowing for 14-day reverse repurchase agreements to 2.15% from 2.25%. The monetary authority is showing signs of weakness in the current market conditions by injecting more money to stimulate the economy amid inflationary pressure.

There’s also pressure from the upcoming US Federal Reserve Committee meeting on September 21, which is expected to raise interest rates by 0.75% as central bankers work to ease inflationary pressure. As a result, 5-year Treasury yields soared to 3.70%, the highest level since November 2007.

Let’s look at crypto derivatives data to understand if professional investors changed stance as Bitcoin crashed below $19,000.

There was no impact on BTC derivatives metrics during the 9% crash

Retail traders generally avoid quarterly futures contracts because of their price difference from spot markets, but they are preferred instruments by professional traders because they prevent the fluctuation in funding rates that often occurs in a contract. term perpetual.

Annualized 3-month Bitcoin futures premium. Source: Laevitas

The indicator should trade at a 4-8% annualized premium in healthy markets to cover the associated costs and risks. So, it’s safe to say that derivatives traders have been neutral to bearish over the past two weeks, with the Bitcoin futures premium remaining below 2% the entire time.

More importantly, the September 19 breakup had no significant impact on the indicator, which stands at 0.5%. This data reflects the reluctance of professional traders to add leveraged (bearish) short positions at current price levels.

Bitcoin options must also be analyzed to exclude externalities specific to the futures instrument. For example, the 25% delta skew is a telltale sign when market makers and arbitrage desks are overcharging for upside or downside protection.

Bitcoin options 30 days 25% delta skew: Source: Laevitas

In bear markets, option investors give higher odds for falling prices, causing the bias indicator to rise above 12%. On the other hand, uptrends tend to push the bias indicator below minus 12%, which means bearish puts are discounted.

The 30-day delta skew had been near the 12% threshold since September 15 and signaled that options traders were less inclined to offer downside protection. The negative price movement on September 19 was not enough to tip these whales lower, and the indicator is currently at 11%.

Related: Bitcoin and Ethereum Crash Continues as 10-Year US Treasury Yield Surpasses June High

The bottom could be reached, but it depends on macroeconomic and global obstacles

Derivative metrics suggest that Bitcoin’s September 19 price drop was partly expected, which explains why support at $19,000 was regained in less than two hours. Yet none of this will matter if the US Federal Reserve raises interest rates above the consensus or if stock markets crash further due to the energy crisis and political tensions.

Therefore, traders should continuously analyze macroeconomic data and monitor the attitude of central banks before trying to pin a flag on the ultimate low of the current bear market. Currently, the odds of Bitcoin testing prices below $18,000 remain high, especially given the low demand for leverage on BTC futures.

The views and opinions expressed herein 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 before making a decision.