Bitcoin futures data hints at $22K as the next logical step

A Bitcoin (BTC) price correction down to $22,000 is becoming progressively apt arsenic BTC derivatives person begun to grounds bearish tendencies.

The terms illustration of Bitcoin leaves small uncertainty that capitalist sentiment worsened aft the much-hyped triumph by Grayscale Asset Manager against the U.S. Securities and Exchange Commission (SEC) connected Aug. 29 and the postponement of aggregate spot BTC exchange-traded money (ETF) requests by the SEC. 

The cardinal question remains whether the prospects of an ETF tin outweigh the increasing risks.

Spot Bitcoin ETF hype is fading

By Aug. 18, the full 19% rally that occurred pursuing BlackRock ETF archetypal filing had afloat retracted arsenic Bitcoin moved backmost to $26,000.

Next, determination was a failed effort to reclaim the $28,000 enactment arsenic investors raised the likelihood of an ETF support pursuing the affirmative quality connected Grayscale Bitcoin Trust (GBTC) request.

Bitcoin/USD terms index, 1-day. Source: TradingView

Cryptocurrency investors' morale deteriorated arsenic the S&P 500 scale closed astatine 4,515 connected Sept. 1, simply 6.3% beneath its all-time precocious from January 2022. Even gold, which hasn't been capable to interruption supra the $2,000 level since mid-May, is 6.5% distant from its all-time high. Consequently, the wide feeling for Bitcoin's investors conscionable 7 months up of its halving successful 2024 is surely little affirmative than expected.

Some analysts volition pin Bitcoin's lackluster show connected the ongoing regulatory actions against the 2 starring exchanges, Binance and Coinbase. Moreover, aggregate sources assertion that the U.S. Department of Justice (DOJ) is apt to indict Binance successful a transgression probe. The claims are based connected allegations of wealth laundering and imaginable violations of sanctions involving Russian entities.

Related: Weekly adjacent risks BTC terms ‘double top’ — 5 things to cognize successful Bitcoin this week

Moreover, aggregate sources assertion that the U.S. Department of Justice (DOJ) is apt to indict Binance successful a transgression probe. The claims are based connected allegations of wealth laundering and imaginable violations of sanctions involving Russian entities.

North Code Capital CIO and Bitcoin protagonist Pentoshi expressed the existent conditions successful a societal web post:

According to Pentoshi, the imaginable gains from a spot ETF support outweigh the terms interaction from the eventual regulatory actions against the exchanges. There's nary mode to ascertain whether specified an presumption is valid, but specified an investigation fails to see that U.S. inflation, arsenic measured by CPI, has travel down to 3.2% successful July 2023 from 9.1% successful June 2022.

Moreover, the U.S. Federal Reserve's (Fed) full assets person been reduced to $8.12 trillion, down from the caller $8.73 highest successful March 2023. This signals that the monetary authorization has been draining liquidity from the markets, which is detrimental to Bitcoin's ostentation extortion thesis.

Looking astatine a longer clip frame, Bitcoin's terms has been holding the $25,000 level since mid-March, but taking a person look astatine derivatives information shows that bulls' condemnation is getting tested.

Bitcoin derivatives amusement decreasing request from bulls

Bitcoin monthly futures typically commercialized astatine a flimsy premium to spot markets, indicating that sellers are asking for much wealth to hold settlement. As a result, BTC futures contracts successful steadfast markets should commercialized astatine a 5 to 10% annualized premium — a concern known arsenic contango, which is not unsocial to crypto markets.

Bitcoin one-month futures annualized premium. Source: Laevitas.ch

Bitcoin's existent 3.5% futures premium (basis rate) is astatine its lowest constituent since mid-June, anterior to BlackRock's filing for a spot ETF. This indicator reflects a decreased request for leverage buyers utilizing derivative contracts.

Traders should besides analyse options markets to recognize whether the caller correction has caused investors to go little optimistic. The 25% delta skew is simply a telling motion erstwhile arbitrage desks and marketplace makers overcharge for upside oregon downside protection.

In short, if traders expect a Bitcoin terms drop, the skew metric volition emergence supra 7%, and phases of excitement thin to person a antagonistic 7% skew.

Bitcoin 30-day options 25% delta skew. Source: Laevitas.ch

As displayed above, the options' 25% delta skew has precocious entered bearish territory, with protective enactment (sell) options trading astatine a 9% premium connected Sep. 4 compared to akin telephone (buy) options.

BTC futures hint at $22,000 next

Bitcoin derivatives information suggests that the bearish momentum is gaining strength, particularly since the support of a spot ETF could perchance beryllium deferred until 2024, fixed the SEC's concerns astir the deficiency of measures to forestall a important information of trading occurring connected unregulated offshore exchanges based connected stablecoins.

Meanwhile, the uncertainty successful the regulatory scenery does favour the bears arsenic there's nary mode to disregard the fear, uncertainty, and uncertainty (FUD) surrounding imaginable actions from the DOJ oregon the ongoing lawsuits against the exchanges by the SEC.

Related: Bitcoin ETF applications; Who is filing and erstwhile the SEC whitethorn decide

Ultimately, a retracement down to $22,000 — the level past seen erstwhile Bitcoin’s futures premium was 3.5% — is the astir apt scenario, considering the caller inability to prolong a affirmative terms momentum contempt the heightened chances of a spot Bitcoin ETF approval.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.