- May 26, 2023
- Posted by: [email protected]
- Category:
According to derivatives data, Bitcoin’s price appears to be reaching a potentially positive breakout. The macroeconomic landscape, however, will ultimately determine the overall trend. Bitcoin has maintained a consistent price near $27,000 since May, exhibiting reduced volatility during this period. This pattern bears a striking resemblance to early April, when Bitcoin traded within the $27,800 to $28,700 range on the 12-hour chart for 11 consecutive days. Traders are now contemplating whether a bullish breakout is likely to occur for Bitcoin.
It is important to note that there are notable differences between the previous bullish breakout in early April and the current situation in terms of the Bitcoin futures premium. Although the 4% level observed on April 10 fell below the neutral 5% threshold, it still represented an increase from the previous two weeks. In contrast, the current indicator stands at 2%, aligning with the levels of the previous two weeks. Consequently, traders are currently less optimistic compared to early April.
Traders should also pay attention to options markets to gauge whether the recent correction has influenced investor sentiment positively. The 25% delta skew is a valuable metric that reflects the overpricing of upside or downside protection by arbitrage desks and market makers. If traders anticipate a decline in Bitcoin’s price, the skew metric will rise above 7%. Conversely, periods of excitement tend to have a negative 7% skew.
According to the BTC options 25% delta skew, traders were overly optimistic on March 30 but gradually shifted to a neutral stance by April 10. This positioning sets the stage for a potential surprise rally since traders are gradually losing faith, as implied by options pricing.
However, the most recent range trading period starting on May 13 revealed balanced pricing between call and put options, reflecting traders’ uncertainty due to unpredictable macroeconomic conditions. Bitcoin options and futures markets currently exhibit little resemblance to early April, when Bitcoin broke out of its 11-day low-volatility phase, experiencing an 8% rally from $28,300 to $30,800 within 24 hours.
This does not rule out the possibility of a similar outcome if the current sideways movement near $27,000 ends with an upward breakout. However, the pricing of BTC options suggests that a bullish breakout is less probable as traders are assigning similar risks to upside and downside movements.
Furthermore, the overall sentiment derived from Bitcoin futures remains neutral to bearish, consistent with the sentiment observed over the past few weeks.
