Let us check the crypto market. Bitcoin derivatives favor bulls data. Nevertheless, data showed that top traders added to their short positions. It is because Bitcoin rallied above twelve thousand dollars.
BTC (Bitcoin) breaks the twelve thousand dollars resistance. Thus, derivatives markets flirt with the overly excessive bullish sentiment. Both, the futures basis, and the options 25% delta skew reached the same levels seen on October twelve. On that date, Bitcoin briefly tested $11,700. Nevertheless, it failed to maintain momentum.
What is the difference between the current situation from nine days ago is the positions of top crypto traders. On October twelve, those traders increased their longs. Nevertheless, amid the recent move to twelve thousand dollars, those professional trades are opening short positions.
Traders should not conclude automatically that the pump of today will turn into a flop exclusively based on the longs-to-shorts indicator, despite this flip in sentiment. For beginners, there is no way to know for sure how the top traders are positioned off-exchange.
For that reason, derivatives pricing is a better way of assessing how bearish or bullish professional traders might be—that indicator if focusing on the actual market conditions. Options put-to-call ration and greed and fear are backward-looking.
To regular spot exchanges, Futures markets tend to trade at a slight premium. That event is not exclusive to crypto markets.
For healthy markets, the futures contracts premium (or basis) must range between five percent to ten percent. Traders bet on much higher prices. Thus, figures above that range denote excessive optimism. A negative future contact premium indicates bearish sentiment in the opposite situation.
Traders should not mistake optimism with leverage. It is because a positive funding rate on perpetual contracts is needed to confirm the thesis.
On most exchanges, the perpetual futures funding rate settles in every eight hours. The fee is paid from long buyers to shorts whenever the funding rate is positive. That situation will be the defining characteristic of overleveraged buyers. Nevertheless, that has not been the case so far. Thus, a 0.05% rate is equivalent to one percent per week.
There has been a similar movement, as for the Bitcoin options market. It is because the twenty-five percent delta skew indicator entered the overconfident bullish territory.
Often, there are discrepancies between the methodologies of exchanges. Thus, readers must monitor changes instead of absolute figures. It is right to conclude that top clients were either adding long positions or neutral ahead of October twelve.
That is the current news of the bitcoin market.
- Trading Instrument