Bitcoin (BTC) price fell to $67,000 on October 21, erasing the gains of the past three days. According to some analysts, one of the reasons for the correction was investors reducing their exposure to Bitcoin due to fears of contagion in traditional markets. However, BTC derivatives indicators have remained noticeably stable.
Demand for Bitcoin derivatives as a hedge has remained steady despite concerns that many economies may be losing momentum and confidence in governments’ ability to refinance their debt is waning. If whales or arbitrage desks had been expecting further declines, these indicators would have reflected more volatility.
Bitcoin futures show no signs of a bearish bet
Bitcoin futures premiums, which typically range between 5% and 10% in neutral markets, saw only a slight impact on October 21. Higher prices in monthly BTC futures reflect extended settlement periods and indicate bullish sentiment when premiums exceed 10%. .
Annual premium for Bitcoin 2-month futures. Source: laevitas.ch
The annual premium (base rate) remained above 9% on October 21, even as Bitcoin retested the $67,000 support level. However, before jumping to conclusions, it is important to determine whether these sentiments are specific to the Bitcoin futures market. Based solely on price charts, Bitcoin’s price movements appear to reflect the daily performance of the stock market.
S&P 500 futures (green) vs. Bitcoin/USD (blue). Source: TradingView
Arif Husain, head of fixed income at T. Rowe Price, told Bloomberg that the U.S. 10-year Treasury yield “will likely test the 5% threshold in the next six months” due to rising inflation expectations and concerns about government spending. . When investors sell bonds, yields increase, indicating that traders are seeking higher returns.
Hussein said the government would “flood” the markets with new debt issuance, noting that the Federal Reserve was attempting to shrink its balance sheet to curb inflation and prevent the economy from overheating. U.S. debt interest costs have surpassed $1 trillion annually, prompting the central bank to consider cutting interest rates.
Bitcoin price has not yet separated from stocks.
Amid uncertainty in the macroeconomic environment, fear, uncertainty, and doubt (FUD) have had a significant impact on Bitcoin price trends.
Bitcoin is often considered uncorrelated to traditional markets, showing periods of complete decoupling from the S&P 500, but its 40-day correlation has remained above 80% over the past month, showing the two asset classes moving in close sync. represents .
Bitcoin 40-day correlation and S&P 500 futures. Source: TradingView
Unlike the period between mid-July and mid-September, when Bitcoin and the S&P 500 had negative or negligible correlation, recent data shows that both markets are being driven by similar factors. This hypothesis is further supported by the increasing correlation between Bitcoin and gold, which exceeded 80% on October 3rd.
relevant: Bitcoin ETF Liquidity Surges After SEC Options Approval – QCP
The Bitcoin options market also reinforces the theme of derivatives resilience. The 25% delta skew indicator shows that put (sell) options are trading at a discount to equivalent call (buy) options.
Bitcoin 1-month option skew, put call. Source: Laevitas.ch
Typically, a skew between -7% and +7% is considered neutral, and the current indicator is on the borderline of a neutral to bullish market.
That said, derivatives traders did not react with panic to the recent decline in Bitcoin prices. If traders had been expecting further declines, the skew would have moved above zero. Overall, Bitcoin derivatives continue to show resilience.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.