Bitcoin futures (BTC) saw their biggest drop in five months. Yesterday’s drop of 11% caused more liquidations from May 9, when BTC fell 12.5% to $ 8,600.
Skewed data shows that the total open interest rate dropped $ 653 million to $ 4 billion on September 3. The numbers include reverse swaps and futures expiry contracts on OKEx, CME, Binance and the residual derivatives exchange.
Yesterday’s move was the biggest daily drop since a terrible $ 1 billion relay on March 13th sent Bitcoin down 50%. On the same day, the worst sell-off in the Dow Jones Industrial Average since 1987 saw a 10% drop.
The sharp correction may not be too negative for the stock markets, but the Nasdaq is down 5%, led by Apple (AAPL -8%), Salesforce (CRM -7.8%) and Microsoft (MSF -6.2%)).
Apple (AAPL) shares were down 8% on September 3, as its market value fell $ 180 billion. This was the biggest daily loss for a single company. By comparison, Bitcoin has a current market cap of $ 194 billion.
The iPhone maker is currently valued at just over $ 2 trillion. Such an impressive number could take over the entire cryptocurrency market and pay a premium of 1,300% to the current market value of $ 140 billion.
The future prize has temporarily disappeared
Futures markets tend to trade at a small premium over regular spot exchanges. This is not something exclusive to the cryptocurrency markets, but rather a derivative effect. By delaying financial settlement until a deal is struck, sellers usually demand more money.
This index of futures contracts is known as the primary index and it typically ranges from 5% to 15% annually. When the premium is positive, the market is described as Contango. On the other hand, a forward premium from zero to negative is unusual and indicates bearish tendencies.
The chart above shows just how important the short decline yesterday in the futures markets was below $ 10,000. This negative premium status, known as the reset, was last seen four months ago, on May 10. Bitcoin (BTC) then quickly rebounded over the next three days, triggering a rebound in positive territory for the core index.
The current annual basis at 4% is not bearish, although it is certainly not bullish like the 10% level it reached three days ago.
Short term options are back to the downside
Bitcoin options markets are also subject to significant price changes. As with the futures market, the recent decline in BTC has led to serious moves in risk aversion. Market makers often increase their spreads during periods of volatility, and what happens the next day is the most telling.
The Delta Skew 25% indicator compares similar buy (buy) and sell (sell) options side by side. The indicator turns negative if the put option premium is higher than for the same risk calls. Such a negative bias means lower defense costs, indicating growth.
The converse is true when the producers are in the market bearish to the downside, which gives a positive reason for the delta index to deviate by 25%.
While the numbers vary depending on how long these options last, the short term tends to have a greater impact. The sharp drop in Bitcoin (BTC) yesterday caused the Delta to turn 25 percent for one month to exceed 10 percent. As shown in the image above, the value usually ranges from -10% (slightly bullish) to + 10% (slightly bearish).
It seems premature to conclude that the options markets are showing a downward tendency, especially when analyzing long-term options. However, it appears that the major traders and producers in the market are now averse to the risk, at least with regard to the price of the MPA.
Bitcoin derivatives remain healthy
Despite the drop in interest rates on Bitcoin futures, the total face value of $ 4 billion is still higher than it was two or three months ago. The same can be said for the current 4% (base) forward premium, which is far from a downward reset.
It should be borne in mind that the cryptocurrency markets are incredibly volatile, and negative volatility in the stock market also affects investors.