Bitcoin Derivatives Data Shows Professional Traders Ignored Today’s $ 41K Bomb

Sometimes all that Bitcoin (BTC) needs to pump 10% is a positive comment from someone like Elon Musk.

The CEO of Tesla has been singled out as the culprit for the recent recession after the company’s May 12 announcement explaining that it would no longer accept Bitcoin payments due to environmental concerns. Musk went on to say that he was researching other cryptocurrencies that required 99% less power consumption.

However, on June 13, the situation was reversed when Musk assured the public that Tesla did not sell any additional Bitcoin. The publication also said that the electric car producer would resume BTC payments as soon as its Bitcoin mining relied on a minimum of 50% clean energy.

In bear markets, major traders are cautious

While retail investors and algorithmic trading robots spring into action as soon as bullish or bearish signals and flash news, major traders tend to be more cautious. Those who have been in the cryptocurrency markets long enough know that positive news can end up being ignored or downplayed in bear markets.

On the other hand, even potentially negative news appears to have little to no impact during bull runs. For example, on September 26, 2020, Kucoin was hacked for $ 150 million. The following week, on October 1, the United States Commodity Futures Trading Commission charged BitMEX with operating an unregistered trading platform and violating anti-money laundering regulations.

Two weeks later, the police allegedly questioned OKEx’s founder, forcing the exchange to suspend crypto withdrawals. If this series of negative news had occurred while Bitcoin was flat or in a bear phase, the price would certainly have stalled during a bear market.

Bitcoin Price on Coinbase in USD, September 2020. Source: TradingView

As shown above, Bitcoin barely had a negative impact at the end of September and October 2020. In fact, at the end of November 2020, Bitcoin was up 74% in two months. This is the main reason why major traders tend to ignore positive news during bear markets and vice versa.

The 3-month futures premium is neutral

A seller of futures contracts will generally demand a price premium to regular spot trades. This situation is not exclusive to cryptocurrency markets and occurs in all derivatives markets because in addition to the risk of exchange liquidity, the seller postpones the settlement and this translates into a higher price.

The 3-month futures premium (base rate) is generally priced at an annualized premium of 5% to 15% in healthy markets. When futures trade below the regular spot exchange price, it indicates short-term bearish sentiment.

Huobi 3-month Bitcoin futures base. Source: Skew

As shown above, the future base has been below 11% since May 20 and flirting with bearish territory multiple times as it tested 5%. The current level indicates a neutral position of the main traders.

Option bias no longer indicates fear

The 25% delta bias compares similar call (buy) and put (sell) options side by side. It will turn positive when the premium for hedging put options is higher than similar risk calls.

The opposite occurs when market makers are bullish and this brings the 25% delta bias indicator into the negative range.

Deribit Bitcoin Options 25% delta deviation. Source: laevitas.ch

The chart above confirms that major traders, including arbitrage desks and market markers, are currently uncomfortable with the price of Bitcoin, as the premium for neutral to bearish put options is higher. However, the current positive bias of 7% is far from the exaggerated fear of 20% observed at the end of May.

Derivatives markets show no evidence that major traders are enthusiastic about the recent $ 40,000 rally. On the positive side, there is room for leverage buyers to mount positions. The strongest rallies usually occur when investors least expect it, and the current scenario seems to be a perfect example.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.