Bitcoin Futures Unchanged As BTC Falls Near Support

Key takeaways:

• Bitcoin options and futures data suggest traders are neutral despite a 7% drop from the peak.

• Stablecoin demand in China remains steady, showing marginal fear in crypto markets.

Bitcoin (BTC) dropped 4% between Thursday and Friday, falling below $115,000 for the first time in two weeks. The correction coincided with the monthly derivatives expiry, which wiped out $390 million worth of futures contracts, equivalent to 14% of open interest. 

To determine if this event altered traders’ longer-term expectations, it’s important to examine Bitcoin futures and options indicators.

Under normal conditions, monthly Bitcoin futures trade at a 5% to 10% annualized premium over spot markets to compensate for the longer settlement period. The current 7% premium falls within that neutral range and is close to Monday’s 8% level. At first glance, the data suggests no shift in investor sentiment, despite Bitcoin’s $4,700 price drop.

Bitcoin reached a record high of $123,181 on July 14, but the last time futures data signaled bullish momentum was in early February. That timing aligns with the United States imposing import tariffs and the disappointment over the US Federal Reserve maintaining interest rates, despite January’s relatively calm Consumer Price Index (CPI) reading of 3% year-over-year.

To validate whether the neutral stance in Bitcoin futures accurately reflects investor sentiment, one should assess the BTC options skew. When traders anticipate a correction, put (sell) options tend to command a premium over call (buy) options, driving the 25% delta skew above 6%.

On Friday, Bitcoin’s 25% delta skew surged to 10%, a rare stress level last seen nearly four months ago. However, the elevated fear was short-lived, as the skew quickly returned to a balanced 1% level. This signals that whales and market makers are pricing similar risks for both upward and downward price moves.

Bitcoin traders cautiously observe 80K BTC wallet transfers 

Bitcoin derivatives suggest that traders are not particularly eager to buy near $116,000, but they also have not panicked after the 7% drop from the all-time high. That is somewhat reassuring given the concerns surrounding the entity that unloaded a portion of its 80,000 BTC balance at Galaxy Digital, according to Nansen CEO Alex Svanevik.