Since May 10, the Bitcoin (BTC) chart has been showing a relatively narrow range of price movement, with the cryptocurrency failing to break the $32,000 resistance several times.

12-hour BTC-USD price on Coinbase. Source: Trading View
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The volatile trading partly reflects stock market uncertainty as the S&P 500 hovered between 3900 and 4180 over the same period. On the one hand, the Eurozone is experiencing economic growth, with gross domestic product up 5.1% year on year. On the other hand, inflation continues to rise, reaching 9% in the United Kingdom.

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Further adding to Bitcoin’s volatility was a proposal for a digital asset regulatory framework submitted to the U.S. Senate on June 7. The 69-page bipartisan bill was supported by Senator Cynthia Lummis of Wyoming and Senator Kirsten Gillibrand of New York and concerns the CFTC’s authority over applicable digital asset spot markets.

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On June 3, the South Korean Financial Supervisory Service (FSS) launched an investigation into 157 payment gateway services that deal with digital assets. Earlier, on May 24, South Korean officials launched an investigation into Do Kwon, the main person involved in the Terra incident.

The US Securities and Exchange Commission (SEC) also launched an investigation against Binance Holdings on June 6th. Binance is the world’s largest cryptocurrency exchange by volume, and the SEC is assessing whether the initial offering of BNB tokens violated securities regulations.

On June 6, the IRA Financial Trust, a platform that provides self-sustaining digital asset retirement and retirement accounts, filed a lawsuit against the Gemini cryptocurrency exchange and claimed that the February 8 breach resulted in the loss of $36 million in crypto assets from Gemini-managed customer accounts. guarded.

Let’s take a look at the Bitcoin futures data to understand how professional traders, including whales and market makers, are positioned.

Derivatives performance reflects investor bearish expectations

Traders need to analyze Bitcoin futures market data to understand how professional traders are positioned. Quarterly contracts are the preferred tool for experienced traders to avoid fluctuations in the funding rate of perpetual futures.

The basis indicator measures the difference between long-term futures contracts and current spot market levels. The annual premium on bitcoin futures should be between 5% and 10% to compensate traders for “locking up” money for two to three months before the contract expires.

Annual premium on 3-month bitcoin futures. Source: Laevitas

The premium for Bitcoin futures has been below 4% since April 12, which is typical of bear markets. Even more troubling is that the last time these professional traders were bullish was more than 6 months ago, when the rate passed the 10% threshold.

To rule out externalities specific to a futures instrument, traders should also analyze the bitcoin options markets. A skewed delta of 25% is a telling sign that bitcoin market makers and arbitrage bureaus are overpriced for upside or downside protection.

During bull markets, option investors give a higher chance of a price spike, causing the skew indicator to drop below the negative 12%. On the other hand, a general panic in a bear market causes a positive skewness of 12% or higher.

30-Day Bitcoin Options Skewed Delta 25%: Source: Laevitas

The 30-day delta skew ranged from 12.5% ​​to 23% between June 1 and 7, signaling that options traders are pricing higher chances of a bear move. However, it shows a moderate improvement in sentiment compared to the previous couple of weeks.

Cryptocurrency regulation and weak economic performance are clearly weighing on investor sentiment, and derivatives data shows that professional bitcoin traders avoid leveraged long positions and are also unwilling to take downside risk.

For now, it is clear that the bears are comfortable setting $32,000 as a resistance level and repeated drops to $28,200 are likely to continue.

The views and opinions expressed here are solely those of author and do not necessarily represent the views of Cryptooshala. Every investment and trading move involves risk. You should do your own research when making a decision.