Home CryptoMarket Bitcoin derivatives suggest $26K resistance level won’t hold for long

Bitcoin derivatives suggest $26K resistance level won’t hold for long

by CryptoFan
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Bitcoin (BTC) price surged 28% between March 12-14, reaching $26,500, its highest level since June 2022. Some believe it’s because the February consumer price index (CPI) rose 6% year-on-year. , although the numbers were in line with expectations.

Inflation measures have hit their lowest level since September 2021, which is a positive development but does not validate the Federal Reserve’s attempt to lower the measure to 2%. Risk markets such as stocks and cryptocurrencies have most likely surged after local bank stocks recovered from March 13 lows.

At 10:30 a.m. ET, shares in First Republic Bank (FRC) were trading up 54%, while Western Alliance Van Corporation (WAL) was up 46% and KeyCorp (KEY) was up 15%. The 30-year average mortgage rate fell to 6.6% from his 7.1% on March 7th. As a result, lower mortgage rates could improve the housing market, which explains some of the rally.

The unexpected drop in mortgage rates could leave price-sensitive homebuyers and homeowners waiting for an opportunity to lock in at lower rates. According to Realtor.com data, the average-priced home buyer faced 49% more monthly mortgage payments than he did a year ago.

China’s economic outlook remains bright despite the possibility of a US recession due to high interest rates. Li Qiang addressed reporters for the first time on March 14 since assuming the position of overseeing China’s highest administrative body, the State Council. According to Qiang, Chinese non-state enterprises intention There is more room for development.

To get a better idea of ​​how professional traders are positioned in the current market conditions, let’s take a look at derivatives indicators.

Bitcoin Margin Market Shows Market Shortage

Margin markets provide insight into how professional traders are positioned to help investors leverage their positions by borrowing cryptocurrencies.

For example, you can increase your exposure by borrowing stablecoins and buying bitcoins. Bitcoin borrowers, on the other hand, can only make short bets against the cryptocurrency.

OKX stablecoin/BTC margin lending ratio. Source: OKX

Since March 13, OKX traders’ margin lending ratio has been above 35, indicating a significant mismatch in favor of Bitcoin longs. Numbers above 40 are rare and are due to the high stablecoin borrowing cost of 25% per year.

To see if professional traders are expecting substantial further price increases, we should look to the BTC options market.

Option traders are far from excited

Traders should also analyze the options market to understand whether the recent correction has made investors less risk-averse. A 25% delta skew is a telltale sign whenever an arbitrage desk or market maker overcharges for upside or downside protection.

This indicator compares similar call (buy) and put (sell) options and is positive when fear is prevalent as the premium for protective put options is higher than the premium for risky call options.

In short, if a trader were to expect a price drop in Bitcoin, the skew indicator would be over 8%, and the generalized excitement would have a skew of -8%.

Related: SVB and Silvergate are dead, but big banks still back crypto companies

Bitcoin 60 Day Option 25% Delta Skew: Source: Laevitas

When Bitcoin broke through the $22,000 resistance level on March 13, the major risk gauge for Bitcoin options exited its three-day fear zone. The delta skew of 25% entered the neutral zone as options traders assigned the same risk rating to bullish and bearish strategies.

However, it would be incorrect to conclude that the temporary negative 5% skew seen on March 14 indicates excessive optimism or bullishness. Analysts and pundits frequently fly their guns and praise the quick reversal, but it stays in the neutral zone between -8% and +8%.

Derivatives data show that professional traders used the margin market to hold long positions and released their bearish stance on March 13, according to options contract pricing. .

The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views or opinions of Cointelegraph.

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