After 10 months of holding a key price area as resistance, Bitcoin has finally breached the $30,000 level. Prices rose 6.5% on April 10, a much-anticipated upbeat move that capped a painful 12 days with extremely low volatility, bringing prices near $28,200. Bulls now believe the bear market is officially over, especially considering BTC prices are up 82% year-to-date.
In another interesting piece of news, Bitcoin’s departure from traditional markets was confirmed after the S&P 500 rose just 0.1% on April 10 while West Texas Intermediate (WTI) crude oil traded down 1.2%. Bitcoin traders predict that the U.S. Federal Reserve’s (Fed) interest rate policy will soon reverse.
inflation risk Is the reason for Bitcoin correlation
Higher interest rates make fixed-income investing more attractive, while businesses and households pay more to refinance debt. A reversal of recent U.S. central bank tightening is seen as positive for risk assets. However, concerns about inflation accompanying a recession (a period of rising inflation and negative economic growth) would be the worst-case scenario for stocks.
Fixed-income traders are betting the U.S. Federal Reserve will raise interest rates again, as the latest economic data showed modest resilience. For example, the US unemployment rate of 3.5% announced on April 7 was the lowest level in half a century.
The US Treasury market is pricing in a 76% chance that the Fed will raise its benchmark interest rate by 0.25% on April 29. There is also uncertainty about the impact of the banking crisis on the sector. JPMorgan, Wells Fargo and Citigroup are scheduled to report first-quarter results on Friday.
Bitcoin’s rally above $30,000 may be the first evidence of a shift in investor perception from representing a risky market to a scarce digital asset that could benefit from escalating inflationary pressures and periods of weak economic growth.
Two key factors in determining whether the rally is sustainable are the use of high leverage, which increases forced liquidation rates during normal price movements, and whether professional traders use options instruments to price the exchange rate.
futures contract eliminateitcoin moderate improvement
Bitcoin quarterly futures are very popular among whales and arbitrage tables. However, these fixed-month contracts tend to trade slightly above the spot market, suggesting sellers are asking for more money to delay payments.
As a result, futures trading in healthy markets will trade with annualized spreads of 5% to 10% — a condition known as lag, and it’s not unique to crypto markets.
cost the difference futures contract year eliminateBitcoin 2 months | Source: Laevitas.ch
Bitcoin traders have been cautious over the past few weeks, and demand for leveraged longs hasn’t spiked even with the recent break above $30,000. However, the Bitcoin futures premium has recovered slightly from a recent low of 3% on April 8 to currently stand at 4.2%. This suggests buyers are not using too much leverage and there is demand in the regular spot market – good for the market.
BTC options trader keep neutral
Traders should also analyze the options market to see if the recent correction has made investors more optimistic. A delta deviation of 25% indicates when arbitrage desks and market makers overcharge to protect bullish or bearish momentum.
In short, the skewness index rises above 7% if a trader is predicting a drop in Bitcoin price, compared to a typical -7% bias during euphoria.
Incremental deviation 25% in the rights contract choose eliminatebitcoin 60 days | Source: Laevitas.ch
Now, the 25% delta bias in options contracts has shifted from a balanced demand between April 9 calls and puts to a modest 4% discount for 10-day protective puts. /4. While this indicated a slight increase in confidence, it was not enough to break the 7% threshold for a modest uptrend.
Essentially, the bitcoin futures and options markets suggest that professional traders are more confident, but not overly optimistic. BTC’s departure from traditional markets heralded a promising future as investors expressed confidence that the cryptocurrency market would benefit from higher inflationary pressures and highlighted traders’ belief that the Federal Reserve will not continue to raise interest rates.
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As reported by Cointelegraph
