Značka: options

$475M in Bitcoin options expire this week — Are bulls or bears poised to win?

Bitcoin (BTC) has been posting higher lows for the past eight weeks, but during this time, BTC has not been able to flip the $24,000 resistance to support on at least three different opportunities. This is precisely why the $475 million Bitcoin options expiry on Aug. 12 might be a game changer for bulls.Considering the current regulatory pressures in play, there seems to be a good enough rationale for avoiding bullish bets, especially after the U.S. Securities and Exchange Commission pressed charges against a former Coinbase manager for illegal securities trading on July 21. The additional impact from the Terra (Luna) — now renamed Terra Classic (LUNC) — ecosystem imploding and subsequent crypto venture capital firm Three Arrows Capital (3AC) registering for bankruptcy continue to weigh on the markets. The latest victim is crypto lending platform Hodlnaut, which suspended user withdrawals on Aug. 8.For this reason, most traders are holding back their bets above $24,000, but events outside of the crypto market might have also negatively impacted investors’ expectations. For example, according to regulatory filings released on Aug. 9, Elon Musk sold $6.9 billion worth of Tesla stock. Moreover, on Aug. 8, Ark Investment manager CEO Cathie Wood explained that the 1.41 million Coinbase (COIN) shares sold in July were caused by regulatory uncertainty and its potential impact on the crypto exchange’s business model.Most bearish bets are below $23,000Bitcoin’s failure to break below $21,000 on July 27 surprised bears because only 8% of the put (sell) options for Aug. 12 have been placed above $23,000. Thus, Bitcoin bulls are better positioned for the $475 million weekly options expiry.Bitcoin options aggregate open interest for Aug. 12. Source: CoinGlassA broader view using the 1.23 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $262 million against the $212 million put (sell) options. Nevertheless, as Bitcoin currently stands above $23,000, most bearish bets will likely become worthless.If Bitcoin’s price remains above $23,000 at 8:00 am UTC on Aug. 12, only $16 million worth of these put (sell) options will be available. This difference happens because there is no use in the right to sell Bitcoin at $23,000 if it trades above that level on expiry.Bulls could pocket a $150 million profitBelow are the four most likely scenarios based on the current price action. The number of options contracts available on Aug. 12 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $21,000 and $22,000: 70 calls vs. 4,200 puts. The net result favors bears by $90 million.Between $22,000 and $24,000: 1,600 calls vs. 1,460 puts. The net result is balanced between bulls and bears.Between $24,000 and $25,000: 3,700 calls vs. 120 puts. The net result favors bulls by $90 million.Between $25,000 and $26,000: 5,900 calls vs. 30 puts. Bulls increase their gains to $150 million.This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.Related: Bitcoin braces for US inflation data as CPI nerves halt BTC price gainsFutures markets show bulls are less inclined to show strengthBitcoin bears need to pressure the price below $24,000 on Aug. 12 to balance the scales and avoid a potential $150 million loss. However, Bitcoin bulls got $265 million worth of leverage long futures positions liquidated between Aug. 8 and 9, so they are less inclined to push the price higher in the short term.With that said, the most probable scenario for Aug. 12 is the $22,000 to $24,000 range, providing a balanced outcome between bulls and bears. Considering Bitcoin’s negative 50% performance year-to-date, even a small $90 million win for bulls could be regarded as a victory, but that would require sustaining BTC above $24,000.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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$29K Bitcoin is closer than you might expect, according to derivatives data

Bitcoin (BTC) price continues to battle at the $24,000 resistance and the price was rejected there on Aug. 10, but the rejection was not enough to knock the price out of the 52-day-long ascending channel. The channel has a $22,500 support and this bullish formation suggests that the BTC price will eventually hit the $29,000 level by early October.Bitcoin/USD 12-hour price. Source: TradingViewBitcoin derivatives data does show a lack of interest from leveraged longs (bulls), but at the same time, it does not price higher odds of a surprise crash. Curiously, the most recent Bitcoin downturn on Aug. 9 was accompanied by a negative performance from U.S.-listed stocks.On Aug. 8, chip and video graphics card maker Nvidia Corp (NVDA) announced that its 2Q sales would present a 19% drop compared to the previous quarter. Moreover, the U.S. Senate passed a bill on Aug. 6 that could negatively impact corporate earnings. Despite freeing $430 billion to fund “climate, healthcare and tax,” the provision would impose a 1% tax on the stock buyback by publicly traded companies.The high correlation of traditional assets to cryptocurrencies remains a huge concern for some investors. Investors should not be getting ahead of themselves even if inflationary pressure recedes because the U.S. Fed monitors employment data very closely. The latest reading displayed a 3.5% unemployment typical of overly heated markets, forcing the monetary authority to keep raising interest rates and revoking stimulus debt purchase programs.Reducing risk positions should be the norm until investors clearly indicate that the U.S. Central Bank is closer to easing the tighter monetary policies. That is precisely why crypto traders are following macroeconomic numbers so closely.Currently, Bitcoin lacks the strength to break the $24,000 resistance, but traders should study derivatives to gauge professional investors’ sentiment.Bitcoin derivatives metrics are neutral-to-bearishThe Bitcoin futures annualized premium measures the difference between longer-term futures contracts and the current spot market levels. The indicator should run between 4% to 8% to compensate traders for “locking in” the money until the contract expiry. Thus, levels below 2% are extremely bearish, while the numbers above 10% indicate excessive optimism.Bitcoin 3-month futures’ annualized premium. Source: LaevitasThe above chart shows that this metric dipped below 4% on June 1, reflecting traders’ lack of demand for leverage long (bull) positions. However, the present 2% reading is not particularly concerning, given that BTC is down 51% year-to-date.To exclude externalities specific to the futures instrument, traders must also analyze Bitcoin options markets. The 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.Related: Bitcoin price sees $24K, Ethereum hits 2-month high as US inflation shrinksIf those traders fear a Bitcoin price crash, the skew indicator will move above 12%. On the other hand, generalized excitement reflects a negative 12% skew.Bitcoin 30-day options 25% delta skew: Source: LaevitasData shows that the skew indicator has been ranging between 3% and 5% since Aug. 5, which is deemed to be a neutral area. Options traders are no longer overcharging for downside protection, meaning they might lack excitement, but at least they have abandoned the “fear” sentiment seen in the last few months.Considering Bitcoin’s current ascending channel pattern, Bitcoin investors probably should not worry too much about the lack of buying demand, according to futures market data. Of course, there is healthy skepticism reflected in derivatives metrics, but the path to a $29,000 BTC price remains clear as long as inflation and employment statistics are under control.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision

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3 key Ethereum derivatives metrics suggest $1,600 ETH support lacks strength

Ether (ETH) price is up 60% since May 3, outperforming leading cryptocurrency Bitcoin (BTC) by 32% over that span. However, evidence suggests the current $1,600 support lacks strength as network use and smart contract deposit metrics weakened. Moreover, ETH derivatives show increasing sell pressure from margin traders.The positive price move was primarily driven by growing certainty of the “Ethereum merge” transition to a proof-of-stake (PoS) consensus network in September. During the Ethereum core developers conference call on July 14, developer Tim Beiko proposed Sept. 19 as the tentative target date. In addition, analysts expect the new supply of ETH to be reduced by up to 90% after the network’s monetary policy change, thus a bullish catalyst.Ethereum’s total value locked (TVL) has vastly benefited from Terra’s ecosystem collapse in mid-May. Investors shifted their decentralized finance (DeFi) deposits to the Ethereum network thanks to its robust security and battle-tested applications, including MakerDAO (MKR) — the project behind the DAI stablecoin.Total value locked by market share. Source: Defi LlamaCurrently, the Ethereum network holds a 59% market share of TVL, up from 51% on May 3, according to data from Defi Llama. Despite gaining share, Ethereum’s current $40 billion deposits on smart contracts seem small compared to the $100 billion seen in December 2021.Demand for decentralized application (DApp) use on Ethereum seems to have weakened, considering the median transfer fees, or gas costs, which currently stand at $0.90. That’s a sharp drop from May 3, when the network transaction costs surpassed $7.50 on average. Still, one might argue that higher use of layer-2 solutions such as Polygon and Arbitrum are responsible for the lower gas fees. Options traders are neutral, exiting the “fear” zoneTo understand how whales and market makers are positioned, traders should look at Ether’s derivatives market data. In that sense, the 25% delta skew is a telling sign whenever professional traders overcharge for upside or downside protection.If investors expect Ether’s price to rally, the skew indicator moves to -12% or lower, reflecting generalized excitement. On the other hand, a skew above 12% shows reluctance to take bearish strategies, typical of bear markets.Ether 30-day options 25% delta skew: Source: Laevitas.chFor reference, the higher the index, the less inclined traders are to price downside risk. As displayed above, the skew indicator exited “fear” mode on July 16 as ETH broke above the $1,300 resistance. Thus, those option traders no longer have higher odds of a market downturn as the skew remains below 12%. Related: Ethereum will outpace Visa with zkEVM Rollups, says Polygon co-founderMargin traders are reducing their bullish betsTo confirm whether these movements were confined to the specific options instrument, one should analyze the margin markets. Lending allows investors to leverage their positions to buy more cryptocurrency. When those savvy traders open margin longs, their gains (and potential losses) depend on Ether’s price increase.Bitfinex margin traders are known for creating position contracts of 100,000 ETH or higher in a very short time, indicating the participation of whales and large arbitrage desks.Bitfinex ETH margin longs. Source: CoinglassEther margin longs peaked at 500,000 ETH on July 2, the highest level since November 2021. However, data shows those savvy traders have reduced their bullish bets as the ETH price recovered some of its losses. Data shows no evidence of Bitfinex margin traders anticipating the 65% correction from May to sub-$1,000 in mid-June.Options risk metrics show pro traders are less fearful of a potential crash, but at the same time, margin markets players have been unwinding bullish positions as the ETH price tries to establish a $1,600 support. Apparently, investors will continue to monitor the impacts of nominal TVL deposits and demand for smart contracts on network gas fees before making additional bullish bets.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin bulls aim for $25K price on Friday's $510M options expiry

Fifty-one days have passed since Bitcoin (BTC) last closed above $24,000, causing even the most bullish trader to question whether a sustainable recovery is feasible. However, despite the lackluster price action, bulls have the upper hand on Friday’s $510 million BTC options expiry.Bitcoin index/USD 1-day price. Source: TradingViewInvestors have been reducing their risk exposure as the Federal Reserve raises interest rates and unwinds its record $8.9 trillion balance sheet. As a result, the Bloomberg Commodity Index (BCOM), which measures price changes in crude oil, natural gas, gold, corn, and lean hogs, has traded down 9% in the same period. Traders continue to seek protection via U.S. Treasuries and cash positions as San Francisco Fed President Mary Daly said on Aug. 2 that the central bank’s fight against inflation is “far from done.” With that being said, the tighter monetary impact on inflation, employment levels, and the global economy are yet to be seen.Bearish bets are mostly below $22,000Bitcoin’s recovery above $22,000 on July 27 took bears by surprise because only 28% of the put (sell) options for Aug. 5 have been placed above such a price level. Meanwhile, Bitcoin bulls may have been fooled by the $24,500 pump on July 30, as 59% of their bets lay above $25,000.Bitcoin options aggregate open interest for Aug. 5. Source: CoinGlassA broader view using the 1.60 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $315 million against the $195 million put (sell) options. Nevertheless, as Bitcoin currently sits above $23,000, most bearish bets will likely become worthless.For instance, if Bitcoin’s price remains above $23,000 at 8:00 am UTC on Aug. 5, only $19 million worth of these put (sell) options will be available. This difference happens because there is no use in a right to sell Bitcoin at $22,000 or $20,000 if it trades above that level on expiry.Bulls might pocket a $200 million profitBelow are the four most likely scenarios based on the current price action. The number of options contracts available on Aug. 5 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $20,000 and $22,000: 100 calls vs. 3,700 puts. The net result favors bears by $75 million.Between $22,000 and $24,000: 1,400 calls vs. 1,600 puts. The net result is balanced between call (buy) and put (sell) instruments.Between $24,000 and $25,000: 3,800 calls vs. 100 puts. The net result favors bulls to $90 million.Between $25,000 and $26,000: 0 calls vs. 7,900 puts. Bulls extend their gains to $200 million.This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.Related: Inflation punishes the prudent while Bitcoin gives future hope — Jordan PetersonBears have less margin required to suppress Bitcoin priceBitcoin bulls need to push the price above $24,000 on Aug. 5 to secure a $90 million profit. On the other hand, the bears’ best-case scenario requires pressure below $22,000 to set their gains at $75 million.However, Bitcoin bears had $140 million leverage short positions liquidated on July 26-27, according to data from Coinglass. Consequently, they have less margin required to push the price lower in the short term.The most probable scenario is a draw, causing the Bitcoin price to range between $22,000 and $24,000 ahead of the Aug. 5 options expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin derivatives show a lack of confidence from bulls

Bitcoin (BTC) has been trending up since mid-July, although the current ascending channel formation holds $21,100 support. This pattern has been holding for 45 days and could potentially drive BTC towards $26,000 by late August.Bitcoin/USD 12-hour price. Source: TradingViewAccording to Bitcoin derivatives data, investors are pricing higher odds of a downturn, but recent improvements in global economic perspective might take the bears by surprise.The correlation to traditional assets is the main source of investors’ distrust, especially when pricing in recession risks and tensions between the United States and China ahead of House Speaker Nancy Pelosi’s visit to Taiwan. According to CNBC, Chinese officials threatened to take action if Pelosi moved forward.The U.S. Federal Reserve’s recent interest rate hikes to curb inflation brought further uncertainty for risk assets, limiting crypto price recovery. Investors are betting on a “soft landing,” meaning the central bank will be able to gradually revoke its stimulus activities without causing significant unemployment or recession.The correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.S&P 500 and Bitcoin/USD 40-day correlation. Source: TradingViewAs displayed above, the S&P 500 and Bitcoin 40-day correlation currently stands at 0.72, which has been the norm for the past four months.On-chain analysis corroborates longer-term bear marketBlockchain analytics firm Glassnode’s “The Week On Chain” report from Aug. 1 highlighted Bitcoin’s weak transaction and the demand for block space resembling the 2018–19 bear market. The analysis suggests a trend-breaking pattern would be required to signal new investor intake:”Active Addresses [14 days moving average] breaking above 950k would signal an uptick in on-chain activity, suggesting potential market strength and demand recovery.”While blockchain metrics and flows are important, traders should also track how whales and market markers are positioned in the futures and options markets.Bitcoin derivatives metrics show no signs of “fear” from pro tradersRetail traders usually avoid monthly futures due to their fixed settlement date and price difference from spot markets. On the other hand, arbitrage desks and professional traders opt for monthly contracts due to the lack of a fluctuating funding rate. These fixed-month contracts usually trade at a slight premium to regular spot markets as sellers demand more money to withhold settlement longer. Technically known as “contango,” this situation is not exclusive to crypto markets. Bitcoin 3-month futures’ annualized premium. Source: LaevitasIn healthy markets, futures should trade at a 4% to 8% annualized premium, enough to compensate for the risks plus the cost of capital. However, according to the above data, Bitcoin’s futures premium has been below 4% since June 1. The reading is not particularly concerning given that BTC is down 52% year-to-date.To exclude externalities specific to the futures instrument, traders must also analyze Bitcoin options markets. For instance, the 25% delta skew signals when Bitcoin whales and market makers are overcharging for upside or downside protection.If option investors fear a Bitcoin price crash, the skew indicator would move above 12%. On the other hand, generalized excitement reflects a negative 12% skew.Bitcoin 30-day options 25% delta skew: Source: LaevitasThe skew indicator has been below 12% since July 17, considered a neutral area. As a result, options traders are pricing similar risks for both bullish and bearish options. Not even the retest of the $20,750 support on July 26 was enough to instill “fear” in derivatives traders.Bitcoin derivatives metrics remain neutral despite the rally toward $24,500 on July 30, suggesting that professional traders are not confident in a sustainable uptrend. Thus, data shows that an unexpected move above $25,000 would take professional traders by surprise. Taking a bullish bet might seem contrarian right now, but simultaneously, it creates an interesting risk-reward situation.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision

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$1.26B in Ethereum options expire on Friday and bulls are ready to push ETH price higher

Ether’s (ETH) 53% rally between July 13 and 18 gave bulls an edge in July’s $1.26 billion monthly options expiry. The move happened as Ethereum developers set a tentative date for the “Merge,” a transition out of the burdensome proof-of-work (PoW) mining mechanism.Ether USD price index, 12-hour chart. Source: TradingViewAccording to some analysts, by removing the additional ETH issuing used to finance the energy cost required on traditional mining consensus, Ether could finally achieve the “ultra-sound money” status.On Beacon Chain, the issuance will be around 1,600 ETH per day decreasing the inflation significantly from 13,000 ETH per day on PoW. Merge sets effects on monetary policies of Ethereum to become Ultrasound money.(10/15) pic.twitter.com/9hWjhuGpNK— Akshay Jain (@akshayjain865) July 25, 2022Whether or not sound monetary policy revolves around constantly changing the issuing and burning rules remains an open question, but there’s no doubt that the Ethereum developers’ video call on July 14 helped to catapult ETH price.On July 26, a sudden dramatic spike in Ethereum network active addresses raised multiple speculations about whether Ether is targeting its previous all-time high. Analytics firm Santiment reported that the number of 24-hour daily active addresses reached 1.06 million, breaking the previous 718,000 high set back in 2018. Theories such as “Binance doing a maintenance sweep” emerged, but nothing has been confirmed yet.The main victims of Ether’s impressive 20% recovery on July 27 were leveraged bearish traders (shorts) who faced $335 million in aggregate liquidations at derivatives exchanges, according to data from Coinglass.Bears placed their bets below $1,600The open interest for Ether’s July monthly options expiry is $1.27 billion, but the actual figure will be lower since bears were overly-optimistic. These traders got too comfortable after ETH stood below $1,300 between June 13 and 16.The pump above $1,500 on July 27 surprised bears because only 17% of the put (sell) options for July 29 have been placed above that price level.Ether options aggregate open interest for July 29. Source: CoinGlassThe 1.39 call-to-put ratio shows the dominance of the $730 million call (buy) open interest against the $530 million put (sell) options. Nevertheless, as Ether stands near $1,600, most bearish bets will likely become worthless.If Ether’s price remains above $1,500 at 8:00 am UTC on July 29, only $80 million put (sell) options will be available. This difference happens because a right to sell Ether at $1,500 or lower is worthless if Ether trades above that level on expiry.Bulls are comfortable even below $1,600Below are the four most likely scenarios based on the current price action. The number of options contracts available on July 29 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $1,400 and $1,500: 120,400 calls vs. 80,400 puts. The net result favors the call (bull) instruments by $60 million.Between $1,500 and $1,600: 160,500 calls vs. 55,000 puts. The net result favors bulls by $160 million.Between $1,600 and $1,700: 187,100 calls vs. 43,400 puts. The net result favors the call (bull) instruments by $230 million.Between $1,700 and $1,800: 220,800 calls vs. 40,000 puts. Bulls’ advantage increases to $310 million.This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.For example, a trader could have sold a put option, effectively gaining positive exposure to Ether above a specific price, but unfortunately, there’s no easy way to estimate this effect.Bears should throw in the towel and focus on the August expiryEther bulls need to sustain the price above $1,600 on July 29 to secure a decent $230 million profit. On the other hand, the bears’ best case scenario requires a push below $1,500 to reduce the damage to $60 million.Considering the brutal $330 million leverage short positions liquidated on July 26 and 27, bears should have less margin to pressure ETH price lower. With this said, bulls are better positioned to continue driving ETH higher after the July 29 monthly options expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin rallies after Fed interest rate hike, but bears can still win Friday’s $1.76B options expiry

Bitcoin’s (BTC) price has been stuck in a descending channel since July 20 and it is currently heading toward the $20,000 support by the end of July. Adding to this bearish price action, BTC is down 50% year-to-date, while U.S. listed tech stocks, as measured by the Nasdaq-100 index, accumulated a 24% loss.Bitcoin USD price index, 4-hour. Source: TradingViewAs the U.S. Federal Reserve tightens its economic policies by raising interest rates and scaling back debt asset purchases, risk assets have reacted negatively. Fed chair Jerome Powell is set to wrap up a two-day meeting on July 27 and market analysts expect a nominal 0.75% interest rate hike.Tensions in Europe escalate as the Russian state-controlled gas company Gazprom is slated to cut supplies to the Nord Stream 1 pipeline starting on July 27. According to CNBC, the company blames a turbine maintenance issue, but European officials think otherwise.Aiding tech stocks’ performance on July 27 was the U.S. Senate approval of the “Chips and Science” bill, which provides $52 billion in subsidies backed by debt and taxes for U.S. semiconductor production. An additional $24 billion of credits for the sector is estimated, aiming to boost the research to compete with China.For these reasons, traders have mixed feelings about the upcoming Fed announcement and the impact of a global crisis on cryptocurrency markets. As long as Bitcoin’s correlation to traditional markets remains high, especially tech stocks, investors will seek protection by moving away from risk-on asset classes such as cryptocurrencies.Bulls placed their hope on $24,000 and higherThe open interest for the July 29 Bitcoin monthly options expiry is $1.76 billion, but the actual figure will be lower since bulls were caught by surprise as BTC failed to break the $24,000 resistance on July 20.Bitcoin options aggregate open interest for July 29. Source: CoinGlassThe 1.18 call-to-put ratio reflects the $950 million call (buy) open interest against the $810 million put (sell) options. Nevertheless, as Bitcoin stands below $23,000, most of the bullish bets will likely become worthless.For instance, if Bitcoin’s price remains below $23,000 on July 29, bulls will only have $145 million worth of these call (buy) options. This difference happens because there is no use in a right to buy Bitcoin at $23,000 if it trades below that level on July 29 at 8:00 am UTC.Bears can secure a $360 million profit on FridayBelow are the four most likely scenarios based on the current price action. The number of options contracts available on July 29 for call (buy) and put (sell) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $19,000 and $20,000: 400 calls (buy) vs. 19,300 puts (sell). The net result favors bears by $360 million.Between $20,000 and $22,000: 3,900 calls (buy) vs. 11,800 puts (sell). Bears have a $230 million advantage.Between $22,000 and $24,000: 10,300 calls (buy) vs. 8,600 puts (sell). The net result is balanced between bulls and bears.Between $24,000 and $25,000: 14,400 calls (buy) vs. 7,100 puts (sell). Bulls have a $175 million advantage.This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.Bitcoin bears need to pressure the price below $20,000 on July 29 to secure a $360 million profit. On the other hand, bulls can avoid a loss by pushing BTC above $22,000, balancing the valid bets from both sides. Bulls seem heavily vested to put their losses behind and start August with a clean sheet, but it could still go either way.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Ethereum options data show pro traders ready to go long into ETH’s Merge

Ether (ETH) is down 11.5% in seven days even after the recent confirmation of the “Ethereum merge” transition to a proof-of-stake (PoS) consensus network in September. During the Ethereum core developers conference call on July 14, developer Tim Beiko proposed Sept. 19 as the tentative target date.The transition out of energy-intensive mining has been delayed for years, and the journey toward scalability using sharding technology — parallel processing capability — is yet to be scheduled. Still, some analysts expect the network’s monetary policy to boost the value of Ether.Ethereum researcher Vivek Raman highlighted the effect of the “supply shock” and according to the analyst, the “merge” will “reduce ETH’s total supply by 90%,” even though no benefit in transaction fees is to be seen in the current transition stage.Regulatory uncertainty could be partially responsible for Ether’s recent sharp correction. A class-action has been proposed against Yuga Labs for “inappropriately inducing” the community to buy nonfungible tokens (NFTs) and the ApeCoin (APE) token. Furthermore, the law firm claims that Yuga Labs used celebrity promoters and endorsements to “inflate the price” of the BAYC NFTs and the APE tokens.Moreover, on July 26, Infrawatch PH, a think tank in the Philippines, filed a complaint to the local regulator to crack down on Binance’s activities and alleged unregistered operations. The petition claims that the exchange has no office in Manila and only uses “third-party companies” for its technical and customer support services.Options traders are nowhere near optimistic Investors should look at Ether’s derivatives markets data to understand how whales and arbitrage desks are positioned. The 25% delta skew is a telling sign whenever traders overcharge for upside or downside protection.If those market participants feared an Ether price crash, the skew indicator would move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. Ether 30-day options 25% delta skew: Source: Laevitas.chThe skew indicator exited the “fear” zone on July 16 as Ether broke above $1,300, its highest level in 33 days. However, the improvement in traders’ sentiment was not enough to instill confidence as the metric has since remained at the “neutral” threshold. ETH option traders are currently assessing similar upside and downside price movement risks.Long-to-short data show a modest improvement in sentimentThe top traders’ long-to-short net ratio excludes externalities that might have solely impacted the options markets. This metric gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts, thus better informing on how professional traders are positioned.There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.Exchanges’ top traders Ether long-to-short ratio. Source: CoinglassEven though Ether has failed to break the $1,600 resistance, professional traders did not reduce their leverage long positions between July 19 and 26, according to the long-to-short indicator.Binance traders long-to-short ratio failed to hold the 1.13 mark but finished the period at the same level it started, near 1.05. Huobi displayed a modest decrease in its long-to-short ratio, as the indicator moved from 1.02 to the current 0.98 in seven days. However, at the OKX exchange, the metric drastically increased within the period, from 0.88 on July 19 to the present 1.37. Thus, on average, traders increased their bullish positions in seven days.There hasn’t been a significant change in whales and market makers’ leverage positions despite Ether’s 11.5% correction since July 19. Furthermore, options traders are pricing similar risks for Ether’s upside and downside moves, while leverage futures players slightly increased their bullish bets. The overall derivatives metrics reading is positive even though ETH failed to break the $1,600 resistance.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Pro Bitcoin traders are uncomfortable with bullish positions

The previous $19,000 Bitcoin (BTC) support level becomes more distant after the 22.5% gain in nine days. However, little optimism has been instilled as the impact of the Three Arrows Capital (3AC), Voyager, Babel Finance and Celsius crises remain uncertain. Moreover, the contagion has claimed yet another victim after Thai crypto exchange Zipmex halted withdrawals on July 20.Bitcoin/USD 1-day price. Source: TradingViewBulls’ hopes depend on the $23,000 support strengthening as time goes by, but derivatives metrics show professional traders are still highly skeptical of continuous recovery.Macroeconomic headwinds favor scarce assetsSome analysts attribute the crypto market strength to China’s lower-than-expected gross domestic product data, causing investors to expect further expansionary measures by policymakers. China’s economy expanded 0.4% in the second quarter versus the previous year, as the country continued to struggle with self-imposed restrictions to curb another outbreak of COVID-19 infections, according to CNBC.The United Kingdom’s 9.4% inflation in June marked a 40-year high, and to supposedly aid the population, Chancellor of the Exchequer Nadhim Zahawi announced a $44.5 billion (GBP 37 billion) assistance package for vulnerable families. Under these circumstances, Bitcoin reversed its downtrend as policymakers scrambled to solve the seemingly impossible problem of slowing economies amid ever-increasing government debt.However, the cryptocurrency sector faces its own issues, including regulatory uncertainties. For instance, on July 21, the United States Securities and Exchange Commission (SEC) labeled nine tokens as “crypto asset securities,” thus not only falling under the regulatory body’s purview but liable for having failed to register with it. Expressly, the SEC referred to Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX, and XYO. The regulator brought charges against a former Coinbase product manager for “insider trading” after they allegedly used non-public information for personal benefit.Currently, Bitcoin investors face too much uncertainty despite the seemingly helpful macroeconomic backdrop, which should favor scarce assets such as BTC. For this reason, an analysis of derivatives data is valuable in understanding whether investors are pricing higher odds of a downturn.Pro traders remain skeptical of price recoveryRetail traders usually avoid quarterly futures due to their price difference from spot markets. Still, they are professional traders’ preferred instruments because they prevent the perpetual fluctuation of contracts’ funding rates.These fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. But this situation is not exclusive to crypto markets, so futures should trade at a 4% to 10% annualized premium in healthy markets.Bitcoin 3-month futures’ annualized premium. Source: LaevitasThe Bitcoin’s futures premium flirted with the negative area in mid-June, something is typically seen during extremely bearish periods. The mere 1% basis rate, or annualized premium, reflects professional traders’ unwillingness to create leverage long (bull) positions. Investors remain skeptical of the price recovery despite the low cost of opening a bullish trade.One must also analyze the Bitcoin options markets to exclude externalities specific to the futures instrument. For example, the 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 12%, while the opposite holds true during bullish markets.Bitcoin 30-day options 25% delta skew: Source: LaevitasThe 30-day delta skew peaked at 21% on July 14 as Bitcoin struggled to break the $20,000 resistance. The higher the indicator, the less inclined options traders are to offer downside protection. More recently, the indicator moved below the 12% threshold, entering a neutral area, and no longer sitting at the levels reflecting extreme aversion. Consequently, options markets currently display a balanced risk assessment between a bull run and another re-test of the $20,000 area. Some metrics suggest that the Bitcoin cycle bottom is behind us, but until traders have a better view of the regulatory outlook and centralized crypto service providers’ liquidity as the Three Arrows Capital crisis unfolds, the odds of breaking above $24,000 remain uncertain.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bulls or bears? Both have a fair chance in Friday’s Bitcoin options expiry

Bitcoin (BTC) briefly broke above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved more challenging than expected. A positive is that the $24,280 high represents a 28.5% increase from the July 13 swing low at $18,900.According to Yahoo Finance, on July 19, the Bank of America published its latest fund managers survey, and the headline was “I’m so bearish, I’m bullish.” The report cited investors’ pessimism, expectations of weak corporate earnings and equity allocations being at the lowest level since September 2008.The 4.6% advance on the tech-heavy Nasdaq Composite Index between July 18 and 20 also provided the necessary hope for bulls to profit from the upcoming July 22 weekly options expiry. Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin confirmed plans to reestablish the Nord Stream gas pipeline flow after the current maintenance period. However, in the course of the last few months, data shows that Germany has reduced its reliance on Russian gas from 55% to 35% of its demand.Bears placed their bets at $21,000 or lowerThe open interest for the July 22 options expiry is $540 million, but the actual figure will be lower since bears have been caught by surprise. These traders did not expect a 23% rally from July 13 to Ju20 because their bets targeted $22,000 and lower.Bitcoin options aggregate open interest for July 22. Source: CoinGlassThe 1.09 call-to-put ratio shows the balance between the $280 million call (buy) open interest and the $260 million put (sell) options. Currently, Bitcoin stands near $23,500, meaning most bearish bets will likely become worthless.If Bitcoin’s price remains above $22,000 at 8:00 am UTC on July 22, only $30 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $22,000 is useless if BTC trades above that level on expiry.Bears aim for $24,000 to secure a $235 million profitBelow are the four most likely scenarios based on the current price action. The number of options contracts available on July 22 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $20,000 and $21,000: 900 calls vs. 3,000 puts. The net result favors the put (bear) instruments by $60 million.Between $21,000 and $22,000: 2,400 calls vs. 3,000 puts. The net result is balanced between bulls and bears.Between $22,000 and $24,000: 6,600 calls vs. 500 puts. The net result favors the call (bull) instruments by $140 million.Between $24,000 and $26,000: 9,400 calls vs. 0 puts. Bulls take total control, profiting $235 million.This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.Related: Bitcoin may hit $120K in 2023, says trader as BTC price gains 25% in a weekBears have until Friday to turn things aroundBitcoin bears need to pressure the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, the bulls’ best-case scenario requires a slight push above $24,000 to maximize their gains.Bitcoin bears just had $222 million leverage long positions liquidated from July 17 to 20, so they should have less margin required to drive the price higher. In other words, bulls have a head start to sustain BTC above $22,000 ahead of the July 22 options expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin derivatives data suggests bears will pin BTC below $21K leading in Friday’s options expiry

Most Bitcoin (BTC) traders would rather see a sharp price correction and a subsequent recovery than agonize for multiple months below $24,000. However, BTC has been doing the opposite since June 14 and its most recent struggle is the asset’s failure to break above the $22,000 resistance. For this reason, most traders are holding back their bullish expectations until BTC posts a daily close above $24,000.Events outside of the crypto market are the primary factor impacting investors’ perspectives on digital assets and on July 14, United States Treasury Secretary Janet Yellen warned that inflation is “unacceptably high” and she reinforced the support of the Federal Reserve’s efforts. When questioned about the impact of rising interest rates on the economy, Yellen recognized the risk of a recession.On the same day, JPMorgan Chase reported a 28% decline in profits versus the previous year despite recording stable revenues. The difference comes chiefly from a $1.1 billion provision for credit losses because of a “modest deterioration” in its economic outlook.Bitcoin’s correlation to the S&P 500 remains incredibly high and investors fear that a potential crisis in the global financial sector will inevitably lead to a retest of the $17,600 low from June 18.S&P 500 and Bitcoin/USD 30-day correlation. Source: TradingViewThe correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.The S&P 500 and Bitcoin 30-day correlation presently stands at 0.87, which has been the norm for the past four months.Most bullish bets are above $21,000Bitcoin’s failure to break above $22,000 on July 8 took bulls by surprise because only 2% of the call (buy) options for July 15 have been placed below $20,000. Thus, Bitcoin bears are slightly better positioned for the $250 million weekly options expiry.Bitcoin options aggregate open interest for July 15. Source: CoinGlassA broader view using the 1.15 call-to-put ratio shows more bullish bets because the call (buy) open interest stands at $134 million against the $116 million put (sell) options. Nevertheless, as Bitcoin currently stands below $21,000, most bullish bets will likely become worthless.If Bitcoin’s price remains below $21,000 at 8:00 am UTC on July 15, only $25 million worth of these calls (buy) options will be available. This difference happens because there is no use in the right to buy Bitcoin at $21,000 if it trades below that level on expiry.Bears could pocket a $100 million profitBelow are the three most likely scenarios based on the current price action. The number of options contracts available on July 15 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $18,000 and $19,000: 10 calls vs. 5,200 puts. The net result favors bears by $100 million.Between $19,000 and $20,000: 200 calls vs. 3,400 puts. The net result gives bears a $60 million advantage.Between $20,000 and $21,000: 1,300 calls vs. 1,700 puts. The net result is balanced between bulls and bears.This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.Related: Bitcoin fights key trendline near $20K as US dollar index hits new 20-year highFutures markets show bears are better positionedBitcoin bears need to pressure the price below $19,000 on July 15 to secure a $100 million profit. On the other hand, the bulls’ best-case scenario requires a push above $20,000 to balance the scales.The lack of appetite from professional traders in the Bitcoin CME futures indicates that bulls are less inclined to push the price higher in the short term.With that said, the most probable scenario favors bears, and to secure this Bitcoin price only needs to trade below $21,000 going into the July 15 options expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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2 key Ethereum derivatives metrics suggest that $880 was ETH’s bottom

Ether (ETH) price is up 16% since July 1 and has outperformed Bitcoin (BTC) in the last 7 days. The move could be partially driven by investors clinging to their hopes that the Ethereum network transition to proof-of-stake (PoS) consensus will be a bullish catalyst.The next steps for this smart contract involve “the Merge,” which was previously known as Eth 2.0. The final trial on the Goerli test network is expected in July before the Ethereum mainnet gets the green light for its upgrade.Since Terra’s ecosystem collapsed in mid-May, Ethereum’s total value locked (TVL) has increased and the flight-to-quality in the decentralized finance (DeFi) industry largely benefited Ethereum thanks to its robust security and battle-tested applications, including MakerDAO.Total value locked by market share. Source: Defi LlamaEthereum currently holds a 57% market share of TVL, up from 51% on April 8, according to data from Defi Llama. Despite this gain, the current $35 billion in deposits on the networks’ smart contracts seem small compared to the $100 billion seen in December 2021.Further supporting the decrease in decentralized application use on Ethereum is a drop in the median transfer fees, or gas costs, which currently stand at $1.32. This figure is the lowest since mid-December 2020 when the network’s TVL stood at $13 billion. However, one might attribute part of the movement to higher use of layer-2 solutions such as Polygon and Arbitrum.Options traders flirt with the neutral rangeTraders should look at Ether’s derivatives markets data to understand how whales and market makers are positioned. In that sense, the 25% delta skew is a telling sign whenever professional traders overcharge for upside or downside protection.If investors expect Ether price to rally, the skew indicator moves to -12% or lower, reflecting generalized excitement. On the other hand, a skew above 12% shows reluctance to take bearish strategies, typical of bear markets.Ether 30-day options 25% delta skew: Source: Laevitas.chThe skew indicator briefly touched the neutral-to-bearish range on July 7 as Ether completed a 19% rally in four days. But those option traders soon shifted to a more conservative approach, giving higher odds of a market downturn as the skew moved to the current 13% level. In short, the higher the index, the less inclined traders are to price downside risk.Margin traders have turned extremely bullishTo confirm whether these movements were confined to the specific options instrument, one should analyze the margin markets. Lending allows investors to leverage their positions to buy more cryptocurrency. When those savvy traders open margin longs, their gains (and potential losses) depend on the Ether price increase.Bitfinex margin traders are known for creating position contracts of 100,000 ETH or higher in a very short time, indicating the participation of whales and large arbitrage desks.Bitfinex ETH margin longs. Source: CoinglassInterestingly, these margin traders greatly increased their longs since June 13 and the current 491,000 contracts is near its highest level in 8 months. This data shows that these traders are effectively not expecting a disastrous price move below $900.While there hasn’t been a significant shift in pro traders’ options risk metrics, margin traders remain bullish and are unwilling to decrease their longs despite the “crypto winter.” If these whales and market makers are convinced that $880 on June 18 was the absolute bottom, traders may begin to believe that the worst leg of the bear market is behind us.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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