Bitcoin Price Data Suggests Bulls Will Manage to Hold $30,000 as Support This Time

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Bitcoin (BTC) is trading above $31,000 after its 24.3% rally between June 15 and June 23 that caught many off guard. For the bears, that meant facing $165 million in short futures liquidations, but the unexpected rally also caused some discomfort for investors using Bitcoin derivatives.

Inflation remains the biggest question mark for traditional markets, a point highlighted by the recent 50 basis point interest rate hike by the Bank of England, followed by similar moves in Norway and Switzerland, resulting in the highest cost of capital in over a decade. for the region.

In response to questions from lawmakers on the U.S. House Financial Services Committee on June 21, Federal Reserve Chairman Jerome Powell said the process to bring inflation down to 2% still has a long way to go. way to go and reiterated that almost all FOMC participants expect that interest rates will need to be raised a little more by the end of the year.

According to JPMorgan strategists led by Marko Kolanovic, the recent resilience of economies could delay the onset of a recession, so the impacts of monetary tightening by the central bank are yet to be felt, and eventually a recession will be probably needed to restore inflation targeting.

Investors are now wondering if Bitcoin has the strength to trade above the $30,000 resistance amid downside pressure from a possible economic downturn and further central bank activity aimed at dampening demand. of capital.

Therefore, traders should keep a close eye on Bitcoin futures premiums and hedging costs using BTC options.

Bitcoin Derivatives Show Modest Improvement

Quarterly bitcoin futures contracts are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, BTC futures in healthy markets are expected to trade at a 5% to 10% annualized premium, a situation known as contango, which is not unique to crypto markets.

Annualized 3-month Bitcoin futures premium. Source: Laevitas

Demand for leveraged BTC rose slightly as the futures premium jumped to 4.3% on June 22 from 3.2% a week earlier, although it remains below the neutral 5% threshold .

Traders should also analyze the options markets to understand if the recent correction has made investors more optimistic. The 25% delta skew is a telltale sign of when arbitrage desks and market makers are overcharging for upside or downside protection.

In short, if traders anticipate a decline in Bitcoin price, the bias metric will rise above 7%, and excitement phases tend to have a negative bias of 7%.

Bitcoin options 30 days 25% delta skew. Source: Laevitas

The 25% delta skew metric made a full turnaround exiting fear mode on June 16 as Bitcoin price recovered the $26,000 support. The indicator continued to improve through June 22, peaking with moderate greed sentiment at a negative bias of 8%.

Related: Bitcoin-Only Buy-and-Hold Investment Outperforms Long-Term Altcoins, Analysis Shows

The absence of excessive optimism is a good sign

Typically, a futures basis of 4.3% and a negative delta skew of 8% would be considered neutral market indicators, but this is not the case given Bitcoin’s price rise of 21.5% between June 15 and June 22. Some skepticism is healthy for buyers. using derivative contracts and paves the way for further use of leverage if needed.

The heated legal battle between Binance and the United States Securities and Exchange Commission poses a risk to BTC futures. The rulings of the U.S. District Court for the District of Columbia could have serious implications for the cryptocurrency market, as Binance holds the largest market share in spot and derivatives markets.

Uncertainty around the crypto regulatory environment and growing risks of an economic recession are possible explanations for the lack of enthusiasm among Bitcoin derivatives traders.

Other than these external risks, there are no apparent factors to justify a sharp correction in BTC prices, giving bulls just enough optimism to keep the momentum positive.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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