- Although the price of bitcoin is still declining, traders’ interest in the $62,000 level is reflected in the BTC options markets.
Between July 31 and August 1, the price of Bitcoin (BTC) fell by 5.5%, to $62,498—its lowest point in more than two weeks. This shift is thought to be caused by lower expectations for US interest rate decreases as well as the transfer of 47,000 BTC from the estate of the now-defunct exchange Mt. Gox. Although the price of Bitcoin is expected to decline further and retest the $57,000 support level, traders are concerned that the futures markets won’t break under pressure.
Investors sought protection by pulling out of risky markets
The Federal Open Market Committee of the United States said on July 31 that it will maintain interest rates at 5.25%, in line with market forecasts. Fed Chair Jerome Powell may support a rate decrease in September by pointing to strong indicators of the GDP expansion and his confidence in the present rate of inflation reduction. Powell’s remarks, in summary, call for a more measured approach to rate reductions.
As a result of investors’ increasing wagers on US Treasurys, the five-year yield fell to its lowest point in six months. This movement can be partially explained by the growing tensions in the Middle East, which push traders to look for safety in the asset they consider to be the safest. Gold, a precious metal, is another example of a financial instrument supporting this notion. Its price rose to $2,450, barely 1.5% below its peak.
According to Yahoo Finance, investors are concerned that the US economy is headed into a recession, particularly in light of the fact that jobless claims reached an 11-month high and construction investment fell for two straight months. Investors are currently expecting the quarterly results of major heavyweights like Amazon and Apple, which are scheduled for release on August 1. These businesses will be used as a barometer to see if the buzz surrounding artificial intelligence can live up to the expected financial results.
Consequently, given that those investors have been waiting for their dividend for more than a decade, the timing of Mt. Gox’s transfer of over $3 billion worth of Bitcoin on July 30 has sparked worries about a possible sell-off. The Bitcoin was distributed to Bitstamp and Kraken, two cryptocurrency exchanges, as part of the ongoing recovery process. led essence, this action incited investors’ panic as they looked for a reason behind the most recent 5.5% decline led the price of Bitcoin.
There is no indication of stress in Bitcoin futures or options
One should examine Bitcoin derivatives measures in order to comprehend the significance of the retest of the $62,000 support level. For example, to account for the longer settlement period, the pricing of BTC monthly futures contracts usually show a 5% to 10% premium above conventional spot exchanges.
The premium for Bitcoin futures fell to 7% on August 1st, which was the lowest level in three weeks but was still inside the neutral range. Compared to July 30, when the indication was just above the 10% cutoff, this indicates a slight change. Although it would be incorrect to state that investors were pessimistic due to the futures premium, they did indeed become less hopeful.
The 25% delta skew of the Bitcoin options, which indicates the relative demand for call (buy) and put (sell) options, can be used to assess if this emotion is unique to the futures markets. Call options are more in demand when there is a negative skew, while neutral markets usually have a delta skew of between -7% and +7%, which suggests equal pricing for the two instruments.
As of right now, the 25% delta skew of Bitcoin is -5%, which indicates that put options are selling at a little discount, which is characteristic of neutral markets. More significantly, according to BTC derivatives measurements, the metric stayed mostly steady as of July 31, suggesting no discernible influence on mood. It is reasonable to conclude that professional traders do not foresee additional price corrections in the near future, notwithstanding the most recent 5.5% intraday loss.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
