Despite Bitcoins Pullback Its Derivatives Market Shows Strong Resilience

Coin World News Report:
Recently, the price of Bitcoin has experienced a significant correction, but the derivatives market has shown strong resilience and no signs of panic.


On October 21st, the price of Bitcoin quickly fell to $67,000, wiping out the gains of the past three days. Some analysts believe that this correction is mainly due to investors reducing their Bitcoin exposure due to concerns about the traditional market. However, from the indicators of Bitcoin derivatives, there is no panic in the futures market. Despite concerns about the global economic slowdown in multiple countries and the ability of governments to manage debt, the demand in the Bitcoin futures market remains stable. If market whales or arbitrage platforms show bearish sentiment, the volatility of the futures market may further increase.
No signs of bearish sentiment in Bitcoin futures
When the Bitcoin futures premium rate is between 5% and 10%, it indicates that the market is in a neutral state. If it exceeds 10%, it indicates a bullish sentiment, which is determined by its longer settlement period. On October 21st, even though the price of Bitcoin retested the support level of $67,000, the Bitcoin annualized benchmark interest rate remained above 9%. However, a single indicator cannot fully explain the market situation, so further analysis of market performance is needed.
Arif Husain, the head of fixed income at T. Rowe Price, said that rising inflation expectations and concerns about government fiscal spending are expected to test the threshold of 5% for the yield of the U.S. 10-year Treasury bonds within the next six months. When investors sell bonds, yields rise, indicating that traders are seeking higher returns. Husain also pointed out that the U.S. government plans to issue a large amount of new debt to the market, while the Federal Reserve is working to reduce its balance sheet to control inflation and prevent the economy from overheating. The annual cost of U.S. debt interest has exceeded $1 trillion, which will prompt central banks to consider lowering interest rates.
Bitcoin is still correlated with the stock market
In the case of macroeconomic uncertainty, FUD sentiment in the market has a significant impact on the price of Bitcoin. Although some investors believe that Bitcoin has little correlation with the traditional market and occasionally shows signs of decoupling from the S&P 500 index, the correlation between the two has remained above 80% in the past 40 days, indicating that the correlation between the two is still strong. This is in sharp contrast to the decoupling between the two during the three-month period from mid-July to mid-September. Recent data show that changes in both markets are driven by similar factors, and the increasing correlation between Bitcoin and gold is further supporting this trend.
The Bitcoin options market also supports the flexibility of derivatives. A 25% delta skew indicator indicates that the trading price of put (sell) options is lower than that of equivalent call (buy) options. A skew between -7% and +7% is usually considered neutral, and the current indicator hovers near the boundary between neutral and bullish markets. In summary, derivatives traders did not panic during the recent decline in the price of Bitcoin. If further decline is expected, the skew will tend towards zero or higher. Overall, Bitcoin derivatives continue to show resilience.
The Bitcoin options market also shows strong resilience. Typically, a 25% delta skew indicator indicates that the trading price of put (sell) options is lower than that of equivalent call (buy) options. A skew between -7% and +7% is considered neutral, and the current indicator shows that the cryptocurrency market is on the edge of neutrality to bullishness. Overall, derivatives traders did not panic during the recent consolidation period of Bitcoin. If they are bearish on Bitcoin, the delta skew will tend towards zero or higher. Currently, the Bitcoin futures market still exhibits strong resilience.
Disclaimer: FameEX does not guarantee the accuracy and applicability of the official statements of the exchange regarding the data in this field or any related financial advice.