As Bitcoin reaches $40,000, short positions are dispersed, but professional traders remain cautious

Bitcoin (Bitcoin) After the recent 35% rebound, traders may feel more ecstatic, but the data shows that the bears are not too worried, because a similar break occurred in mid-July and the price failed to hold the $40,000 support level.

To understand the optimism of investors this time, let’s disassemble the derivatives data and look at the premium of futures contracts and option skew. Usually, these indicators reveal how professional traders price the possibility of a potential retracement to $36,000.

Coinbase’s Bitcoin price in U.S. dollars. Source: TradingView

Although the pattern is not completely similar, Bitcoin fell to $31,000 on June 8 and rebounded to $41,000 six days later. The 32% gain led to the spread of the $1.4 billion BTC short contract liquidation within a week. The bears obviously did not anticipate this move, but in less than three days, Bitcoin was trading below $38,000 and began to fall.

Therefore, considering that there are no major changes to justify the $40,000 level, the bulls have reason to doubt the sustainability of the current rebound.In addition, continued FUD may depress prices Miners leave China and Binance seeks regulatory approval.

The futures premium has not seen a significant rebound

One of the best measures of professional trader optimism is the premium in the futures market, as it measures the gap between monthly contracts and current spot market levels. In a healthy market, the annualized premium is expected to be 5% to 15%. However, during a bearish market period, there will be a spot premium, and the indicator will weaken or turn negative.

Huobi Bitcoin 1-month futures premium (basis).Source: Askew

According to the above chart, the 1-month futures contract has been unable to recover more than 5% of the annualized premium. Although the current level is considered neutral, some periods of spot premium occurred last month.

In order to eliminate the unique externalities of futures instruments, the option market should also be analyzed.

related: Bloomberg’s senior strategist asserts that now Bitcoin $60,000 is more likely than $20,000

Whenever market makers and professional traders tend to be bullish, they will demand higher call option premiums. This trend will result in a negative 25% delta skew indicator.

On the other hand, whenever the downstream protection cost is higher, the skew index becomes positive.

Deribit Bitcoin options 25% delta skew. Source: laevitas.ch

“Fear” is not in the picture, but neutrality defines the current market

When the number oscillates between minus 10% and plus 10%, the indicator is considered neutral. From May 14 to July 24, 25% of delta skew indicators have been sending out “fear” signals.

However, even the recent rebound to $40,000 is not enough to shift sentiment to “greedy” because the indicator remains neutral at minus 4%.

According to these two derivatives indicators, professional traders have absolutely no signs of bullishness. The 35% price increase may have eliminated the recent fear pattern, but it is not enough to reverse market sentiment.

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