CoinJiawang reported:
Author: Marcel Pechman, CoinTelegraph; Translated by: Deng Tong
On October 21, the price of Bitcoin dropped to $67,000, erasing the gains from the previous three days. Some analysts suggest that one reason for the pullback is the reduced exposure to Bitcoin by investors due to concerns about the impact of the traditional market. However, indicators for Bitcoin derivatives remain stable.
Despite concerns that many economies may lose momentum or confidence in government debt refinancing, the demand for Bitcoin derivatives as a hedging tool remains stable. If whales or arbitrageurs anticipate further declines, these indicators will reflect greater volatility.
Bitcoin futures show no signs of bearish bets
In a neutral market, the premium for Bitcoin futures is usually between 5% and 10%, which was only slightly affected on October 21.
The increase in monthly BTC futures prices reflects the extension of the settlement period, and a premium of over 10% indicates bullish sentiment.
Bitcoin 2-month futures annualized premium. Source: laevitas.ch
The annualized premium (base rate) for October remains above 9%. On the 21st, Bitcoin retested the support level of $67,000. However, it is important to confirm whether this sentiment is limited to the Bitcoin futures market before drawing conclusions. Based solely on the price chart, the price trend of Bitcoin seems to reflect the intraday 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 test the 5% threshold within the next six months” driven by rising inflation expectations and concerns about government fiscal spending. As investors sell bonds, yields rise, indicating traders are seeking higher returns.
Husain pointed out that the government will “issue a large amount of new debt” to the market, while the Federal Reserve is trying to reduce its balance sheet to curb inflation and prevent the economy from overheating. The annual interest cost of U.S. debt has exceeded $1 trillion, prompting the central bank to consider lowering interest rates.
Bitcoin price has not decoupled from stocks
In the uncertainty of the macroeconomic environment, fear, uncertainty, and doubt (FUD) greatly influence the price trend of Bitcoin. Although Bitcoin is usually considered unrelated to the traditional market (it has shown periods of complete decoupling from the S&P 500 index), the correlation for the past 40 days remains above 80%, indicating a close relationship between these two asset classes.
Bitcoin 40-day correlation with S&P 500 futures. Source: TradingView
Unlike the negative or negligible correlation between Bitcoin and the S&P 500 index from mid-July to mid-September, recent data shows that both markets are driven by similar factors. The correlation between Bitcoin and gold is increasing, surpassing 80% on October 3, further supporting this hypothesis.
The Bitcoin options market also reinforces the argument for the elasticity of derivatives. The 25% Delta skew indicator suggests that the trading price of put options is discounted compared to equivalent call options.
Bitcoin 1-month options skew, put options. Source: Laevitas.ch
Typically, a deviation between -7% and +7% is considered neutral, and the current indicator is at the boundary between neutral and bullish markets.
In short, derivative traders have not panicked in response to Bitcoin’s recent price decline. If traders anticipate further price declines, the skew will shift towards zero or higher. Overall, Bitcoin derivatives continue to show resilience.