When Bitcoin (BTC) breaks through the $ 12,000 resistance level, the derivative markets give up the excessive bullish sentiment. The futures and delta options base reached 25% of the same level on October 12th, when BTC briefly tested $ 11,700, but was unable to maintain momentum.
What distinguishes the current situation from nine days is the stance of major digital currency retailers. These traders increased their long positions on October 12th, but during the recent move to $ 12,000, these professional traders couldn’t get it.
Despite this shift in sentiment, traders should not automatically conclude that the current pump will change volatility based on the Purchasing Needs Index. Firstly, it is impossible to know exactly how the best traders are in the OTC market.
For this reason, derivative prices are the best way to measure the rise or fall of professional traders. This indicator focuses on real market conditions, while fear, greed, and the buyer’s attitude lag.
The futures markets are usually traded at a small premium over regular spot exchanges. This event is not exclusive to the cryptocurrency markets, but has a derivative effect.
The premium (or basis) for futures contracts should range between 5% and 10% per annum for healthy markets. Figures in this area indicate an overabundance of optimism as traders bet much higher prices. Conversely, a negative futures premium indicates bearish trends.
The chart above shows the benchmark hovering at overly optimistic levels, as it did on October 12th.
Traders should not confuse optimism with impact, because a positive degree of funding for permanent contracts is also needed to validate this hypothesis.
The fixed future funding rate is calculated every 8 hours on most exchanges, and commissions are paid on long contracts (buyers) on short positions when the funding rate is positive. This might be the case for heavily indebted buyers, but it hasn’t happened yet.
A fixed rate of funding for a Bitcoin contract. Source: Data on digital assets.
The data above shows the fluctuation of the funding rate despite the absence of long funding periods. The standard scale for this indicator is 8 hours. Thus, a rate of 0.05% corresponds to 1% per week. The opposite applies to negative interest rate on financing when the short-term interest rate pays off.
The Bitcoin options market saw similar movement as the Delta Slope Index entered 25% into the dominant bullish territory. Negative bias indicates that the buy (buy) options are worth more than the corresponding sell (sell) options, indicating the possibility of an uptrend. On the other hand, a positive bias indicates a downtrend.
Delta options deviation by 25% in 3 months BTC. Source: Skew
Note how close the rejection indicator is to a 6-month low, indicating a trader’s optimism. The same situation was the same on October 12th, when BTC grew 10% in 4 days. While nothing prevents the Deviation Index from staying at the current level for a long time, this is unlikely in the BTC record.
After examining the derivatives market indicators, we can conclude that professional traders tend to rally by adding long positions above $ 12,000. With the exception of data from the exchange on clean conditions for the best long-term and short-term traders, this has not happened.
The relationship between customers in the long and short term. Source: Binance and OKEx
The exchange methods are often different, so readers should watch for changes, not absolute numbers. Based on the above data, it is safe to say that the major clients are either neutral or added longs before October 12th.
On the other hand, there has been significant movement in both exchanges in the past couple of days as the regular traders have been more actively selling as BTC approached $ 12,000.
Thus, regardless of the direction of the bullish derivatives indicators, these traders are signaling a lack of optimism in the short term.
These opposite signals may appear to reflect the recent 15% rally in 2 weeks, leading to some traders taking profits.