Hurdles to Surpass $18K: Insights from Bitcoin Derivatives Data

  • The BTC futures premium is still a source of concern, but it seems that traders are beginning to value the upside and downside risks similarly
  • On January 9, the delta skew reached its lowest point of 8%, indicating that options traders are valuing identical risks for both the upside and downside

Bitcoin derivatives are financial contracts that derive their value from the price of Bitcoin. Without actually owning the underlying asset, these contracts enable traders to make predictions about the price of Bitcoin in the future. Futures, options, and swaps are just a few of the many derivatives available for Bitcoin.

Although investors may be jubilant that the price of bitcoin has risen beyond $17,400, 27 long days have passed since the cryptocurrency’s last breach of the $17,250 resistance.

Bitcoin reported a 6.5% recovery toward $18,000 on December 13 following a two-week lateral movement, and even if the current movement is still weak, traders think a retest of the $18,250 resistance is still feasible.

Source: TradingView

The S&P 500 index reached its highest point in 26 days on Monday, January 9, to start the week. The Consumer Price Index (CPI) report from January 12 may give some validity to investors’ expectations that the U.S. Federal Reserve will raise interest rates more slowly than previously anticipated due to recent weak economic data.

According to German retail sales figures released on January 6, November saw a 5.9% year-over-year decline. After 30 months of growth, the services sector of the American economy contracted in December.

The Consumer Price Index (CPI) report, which is due out on January 12 and is likely to determine whether the Fed raises interest rates by 25 basis points or 50 in early February, is eagerly anticipated by investors. A lower-than-expected CPI might further improve the performance of the markets because economists anticipate that the data will indicate that inflation climbed by 6.6% in the year leading up to December.

Nevertheless, the effects of a 12-month bear market are still being felt, as reported staff cuts at Osprey Funds in the second half of 2022. For the brokerage accounts of its accredited investors, the investment company provides cryptocurrency solutions, including a trust.

To determine if the current favorable price action has ultimately made crypto investors sentiment optimistic, analysts should concentrate on Bitcoin derivatives.

When financial markets and arbitrage desks overcharge for upside or downside protection, the 25% delta skew is a clear indication.

The skew indicator increases above 10% when options traders increase their odds of a price drop during bear markets. On other hand, the skew indicator typically falls below -10% in bullish markets.

Bitcoin 60-day options 25% delta skew: Source: Laevitas.ch

On January 9, the delta skew reached its lowest point of 8%, indicating that options traders are pricing both upside and downside risks similarly. More significantly, the present level is the lowest since November 8, or since the collapse of the FTX market.

The data from derivatives suggests that traders are less risk averse, even if there is no proof that a push to $18,250 is imminent.

According to the statistics, it may be challenging to increase the price of bitcoin above $18,000 given the state of the market. This may be due to a variety of factors, including increased institutional investor participation, regulatory uncertainty, and high transaction costs. It’s crucial to keep in mind that the market is extremely volatile and that prices could at any time abruptly gain momentum. Investors should conduct their own research and make well-informed judgments.

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