The crypto market is up 12.5% in the past seven days and has reached a market cap of $ 2.44 trillion. This move doesn’t seem to instill confidence, however, as the same level was tested 16 days before the 27% retracement, followed by Ether (ETH) attempting to break the $ 3,650 over the next six days.
Regulation appears to be a huge concern for buyers as the U.S. House of Representatives is expected to vote on a $ 1 trillion infrastructure bill this month. Not only does the law specify who is qualified to be a broker, it also imposes anti-money laundering (AML) and your customers (KYC) type requirements for many types of cryptocurrency transactions that can also be harmful to DeFi protocols.
As shown above, the negative performance of the top 10 cryptocurrencies over the past 30 days has had an impact on investor sentiment. Because of this, it is important to measure more than the nominal price of Bitcoin. Traders should also analyze BTC derivatives indicators such as futures market premium and option deviation.
Futures premium suggests that traders are slightly optimistic
The underlying interest rate is also generally referred to as the futures premium and measures the difference between a longer-term futures contract and the current spot market level.
In healthy markets, an annual premium of 5 to 15% is expected, a situation known as contango. This price difference is caused by the seller asking for more money in order to withhold payments longer.
As described above, the annual premium of 9% is now neutral, but shows an improvement compared to a few weeks ago. This suggests that traders are cautiously bullish and leave room for even longer leverage once confidence is fully restored.
Options traders exit “fear” mode
In order to exclude external factors specific to the futures instrument, one should also analyze the options markets.
The 25% delta deviation compares call (buy) and put (sell) options similarly. The index becomes positive when “fear” prevails because the put premium is higher than with similar risky call options.
The opposite happens when market makers are bullish, which causes the 25% delta deviation indicator to move into negative territory. Measured values between minus 8% and plus 8% are generally considered to be neutral.
Notice how bitcoin options traders entered the “fear” plane on September 25th as the $ 41,000 support was tested multiple times. However, there has been a drastic change since September 30th and the indicator is now in neutral territory.
In the current situation, both the futures and the 25% discount option represent a typical “half-full-glass” scenario. This means that although Bitcoin hits a 27-day high and is above the resistance of $ 50,000, buyers still have room for additional leverage before indicators show signs of blood pressure spike or euphoria.
A breakout of $ 50,000 on the current meager data on derivatives is often viewed as a weakness. However, given that the total crypto cap remains in the same position it was 30 days ago and regulatory concerns are not addressed, there is nothing to worry about. Right now, neither the futures nor the options markets are showing any bearish signs.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.