The price of bitcoin may have risen 10% to $41,000, but derivatives signs imply that elite traders aren't that enthusiastic. A good word from someone like Elon Musk might sometimes be enough to send Bitcoin (BTC) up 10%.
Following the company's statement on May 12 that it will no longer accept Bitcoin payments due to environmental concerns, the Tesla CEO has been blamed for the current drop. Musk then went on to explain that he was investigating different coins that used 99 percent less energy.
On June 13, however, the situation changed when Musk told the public that Tesla had not sold any more Bitcoin. The message also stated that the electric-car manufacturer will restart accepting Bitcoin payments after its Bitcoin mining operations used at least 50% renewable energy.
While regular investors and algorithmic trading bots are quick to react to optimistic or negative signals and breaking news, elite traders are more cautious. Those who have followed the crypto markets for a long time know that in bear markets, positive news is often disregarded or severely understated.
During bull runs, however, even potentially unfavorable news appears to have little to no effect. Kucoin, for example, was hacked for $150 million on September 26, 2020. The US Commodity Futures Trading Commission accused BitMEX the next week, on Oct. 1, with running an unlicensed trading platform and breaching anti-money laundering standards.
Two weeks later, police allegedly detained OKEx's founder, prompting the exchange to halt cryptocurrency withdrawals. If this string of negative news had occurred when Bitcoin was flat or in a bearish trend, the price would have surely paused.
A seller of a futures contract will normally seek a higher price than a typical spot trade. This is not unique to crypto markets; it occurs in all derivatives markets since, in addition to the exchange liquidity risk, the seller is delaying settlement, resulting in a higher price.
In healthy markets, the 3-month futures premium (base rate) often trades at a 5 percent to 15% annualized premium. Short-term pessimistic sentiment is shown when futures trade below the normal spot exchange price.
Fear is no longer reflected in the skew of alternatives.
The 25 percent delta skew compares call (buy) and put (sell) options that are comparable to each other. When the premium for protective put options is higher than the premium for equivalent risk call options, the indicator will become positive.
When market makers are optimistic, the 25 percent delta skew indicator moves into the negative area, indicating that they are bullish. Top traders aren't thrilled with the latest $40,000 increase, according to derivatives markets. On the plus side, leverage buyers may still get in on the action. Stronger upswings frequently happen when investors aren't anticipating them, and the current situation appears to be an excellent illustration.
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