Since May 10, the Bitcoin (BTC) chart shows a relatively tight range of price movement and the cryptocurrency has failed to break the $32,000 resistance on multiple occasions.
The choppy trade partly reflects stock market uncertainty as the S&P 500 index ranged from 3,900 to 4,180 in the same period. On the one hand, there has been economic growth in the Eurozone where GDP grew by 5.1% year over year. On the other hand, inflation in the United Kingdom has reached 9%.
Further adding to the volatility of bitcoin was the Digital Asset Regulatory Framework proposal introduced in the US Senate on June 7. The 69-page bipartisan bill is backed by Senator Cynthia Loomis of Wyoming and Senator Kirsten Gillibrand of New York and addresses the CFTC’s authority when it comes into force. Digital asset spot market.
On June 3, South Korea’s Financial Supervisory Service (FSS) launched an investigation into 157 payment gateway services dealing with digital assets. Earlier, on 24 May, South Korean authorities launched an investigation against Do Kwon, the primary person in the Terra incident.
The US Securities and Exchange Commission (SEC) also launched an investigation against Binance Holdings on June 6. Binance is the world’s largest crypto exchange in terms of volume and the SEC is evaluating whether the BNB token offering initial coin breaches securities regulations.
On June 6, IRA Financial Trust, a platform providing self-directed digital asset retirement and pension accounts, filed a lawsuit against the Gemini cryptocurrency exchange, claiming that the February 8 breach resulted in a transfer of crypto assets from customer accounts under Gemini. $36 million in damages. custody.
Let’s look at bitcoin futures data to see how professional traders, including whales and market makers, are positioning themselves.
Derivatives metrics reflect investors’ bearish expectations
Traders should analyze bitcoin futures market data to understand how professional traders are positioning. Quarterly contracts are the preferred instrument for experienced traders to avoid the fluctuating funding rate of perpetual futures.
The Base Indicator measures the difference between long-term futures contracts and current spot market levels. Bitcoin futures annual premiums should run between 5% and 10% to allow traders to “lock in” money for two to three months until the expiration of the contract.
Bitcoin futures premium has been below 4% since April 12, a typical reading for bearish markets. Even more worrying, the last time these professional traders were bullish was six months ago when the metric crossed the 10% threshold.
To exclude specific externalities for a futures instrument, traders should also analyze the bitcoin options markets. When bitcoin market makers and arbitrage desks are overcharging a security to the upside or downside, a 25% delta skew is a sign.
During bullish markets, options investors place high odds for the price pump, causing the skew indicator to drop below the negative 12%. On the other hand, the generalized panic of a bear market brings a positive 12% or more skew.
The 30-day delta skew between June 1 and 7 has been between 12.5% and 23%, indicating that options traders are pricing in higher odds of a bearish movement. Nevertheless, it shows an improvement in the moderate sentiment over the past few weeks.
Cryptocurrency regulation and weak economic numbers are clearly weighing on investor sentiment and derivatives data prompts professional bitcoin traders to avoid leveraged long positions, as well as being reluctant to take downside risks.
For the time being, it is clear that the bears are comfortable setting $32,000 as resistance and a repeated decline towards the $28,200 level is likely to continue.
The views and opinions expressed here are solely those of Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.