Bitcoin price chases after $35K as BTC derivatives data signals fresh inflow

Bitcoin’s (BTC) terms enactment is the speech of the municipality this week and based connected the existent sentiment expressed by marketplace participants connected societal media, 1 could astir presume that the long-awaited bull marketplace has started. 

As Bitcoin's terms rallied by 16.1% betwixt Oct. 22 and Oct. 24, bearish traders utilizing futures contracts recovered themselves liquidated to the tune of $230 million. One information constituent that stands retired is the alteration successful Bitcoin's unfastened interest, a metric reflecting the full fig of futures contracts successful play.

The grounds suggests that Bitcoin shorts were taken by astonishment connected Oct. 22 but they were not employing excessive leverage.

Bitcoin futures aggregate unfastened interest, USD. Source: Coinglass

During the rally, BTC futures unfastened involvement accrued from $13.1 cardinal to $14 billion. This differs from August 17, erstwhile Bitcoin's terms dropped by 9.2% successful conscionable 36 hours. That abrupt question caused $416 cardinal successful agelong liquidations, contempt the little percentage-size terms move. At the time, Bitcoin's futures unfastened involvement decreased from $12 cardinal to $11.3 billion.

Data seems to corroborate the gamma compression mentation that is circulating, which implies that marketplace makers had their halt losses "chased."

Bitcoin property NotChaseColeman explained connected X societal web (formerly Twitter), that arbitrage desks were apt forced to hedge abbreviated positions aft Bitcoin broke supra $32,000, triggering the rally to $35,195.

The astir important contented with the abbreviated compression mentation is the summation successful BTC futures unfastened interest. This indicates that adjacent if determination were applicable liquidations, the request for caller leveraged positions outpaced the forced closures.

Did Changpeng Zhao and BNB play a relation successful Bitcoin's terms action?

Another absorbing mentation from idiosyncratic M4573RCH connected X societal web claims that Changpeng "CZ" Zhao utilized BNB arsenic collateral for borderline connected Venus Protocol, a decentralized concern (DeFi) exertion aft being forced to merchantability Bitcoin to "shore up" the terms of BNB token.

According to M4573RCH's theory, aft a palmy intervention, CZ would person paid backmost the involvement connected Venus Protocol and bought backmost Bitcoin utilizing BNB to "rebalance" the position.

Notably, the BNB proviso connected the level exceeds 1.2 cardinal tokens, worthy $278 million. Thus, assuming that 50% of the presumption is controlled by a azygous entity, that's capable to make a $695 cardinal agelong presumption utilizing 5x leverage connected Bitcoin futures.

Of course, 1 volition ne'er beryllium capable to corroborate oregon disregard speculations specified arsenic the Venus-BNB manipulation oregon the "gamma squeeze" successful Bitcoin derivatives. Both theories marque sense, but it is intolerable to asseverate the entities progressive oregon the rationale down the timing.

The summation successful BTC futures unfastened involvement indicates that caller leveraged positions person entered the space. The question could person been driven by quality that BlackRock's spot Bitcoin ETF petition was listed connected the Depository Trust & Clearing Corporation (DTCC), adjacent though this lawsuit does not summation the likelihood of support by the U.S. Securities and Exchange Commission.

Bitcoin derivatives constituent to a steadfast bull tally and country for further gains

To recognize however nonrecreational traders are positioned aft the astonishment rally, 1 should analyse the BTC derivatives metrics. Normally, Bitcoin monthly futures commercialized astatine a 5% to 10% annualized premium compared to spot markets, indicating that sellers request further wealth to postpone settlement.

Bitcoin 1-month futures premium. Source: Laevitas.ch

The Bitcoin futures premium reached 9.5% connected Oct. 24, marking the highest level successful implicit a year. More notably, it broke supra the 5% neutral threshold connected Oct. 23, putting an extremity to a 9-week play dominated by bearish sentiment and debased request for leveraged agelong positions.

Related: Matrixport doubles down connected $45K Bitcoin year-end prediction

To measure whether the interruption supra $34,000 has led to excessive optimism, traders should analyse the Bitcoin options markets. When traders expect a driblet successful Bitcoin's price, the delta 25% skew tends to emergence supra 7%, portion periods of excitement typically spot it dip beneath antagonistic 7%.

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

The Bitcoin options' 25% delta skew shifted from neutral to bullish connected Oct. 19 and continued successful this absorption until it reached -18% connected Oct. 22. This signaled utmost optimism, with enactment (sell) options trading astatine a discount. The existent -7% level suggests a somewhat balanced request betwixt telephone (buy) and enactment options.

Whatever triggered the astonishment terms rally prompted nonrecreational traders to determination distant from a play characterized by pessimism. However, it wasn't capable to warrant excessive pricing for telephone options, which is simply a affirmative sign. Furthermore, determination is nary denotation of excessive leverage from buyers, arsenic the futures premium remains astatine a humble 8%.

Despite the ongoing speculation regarding the approval of a spot Bitcoin ETF, determination is capable grounds to enactment a steadfast influx of funds, justifying a rally beyond the $35,000 mark.

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.