Bitcoin bulls aim to flip $30K to support, but derivatives data show traders lack confidence

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Bitcoin (BTC) Jumped 19% From May 12 Lows of $25,400, But Is Investor Confidence Restored in the Market? Given the ascending channel formation, it is possible that the bulls are planning a recovery towards the $30,000 level, at least in the near term.

Bitcoin/USD 4 hour price on Bitstamp. Source: TradingView

Will derivatives data support a retest of $30,000, or is bitcoin potentially going down another leg after failing to break above $31,000 on May 16?

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One factor putting pressure on the price of BTC could be Luna Foundation Guard (LFG) selling 80,081 bitcoins or 99.6% of its positions.

On 16 May, LFG released details on the remaining crypto collateral and, aside from that, the sell risk of the project has been eliminated, but investors question the stability of other stablecoins and their decentralized finance (DeFi) applications.

Recent comments by FTX CEO Sam Bankman-Fried regarding the proof-of-work (PoW) mining environment and scalability issues further fueled the current negative sentiment. According to Bankman-Fried, using Proof-of-Stake (PoS) consensus is better suited to accommodate millions of transactions.

On 14 May, a local newspaper in the United Kingdom reported the Treasury Department’s intention to regulate stablecoins across the UK. According to a Treasury spokesperson, the plan does not include legalizing algorithmic stablecoins and instead prefers 1:1 fully backed stablecoins.

While this news may have affected market sentiment and the price of BTC, let’s take a look at how sizable traders are positioning in the futures and options markets.

Bitcoin futures showing premium flexibility

The Base Indicator measures the difference between long-term futures contracts and current spot market levels. The annual premium of bitcoin futures should run between 5% and 10% to allow traders to “lock in” money for two to three months until the contract expires. Levels below 5% are bearish, while numbers above 10% indicate excessive demand from longs (buyers).

Annual premium for bitcoin 3 month futures. Source: Laevitas

The above chart shows that Bitcoin’s base indicator moved below the 5% neutral range on April 6th, but there has been no panic following the sell-off at $25,400 on May 12th. This means that the metric is slightly positive.

Even though the base indicator is indicating bearish sentiment, one must remember that Bitcoin is down 36% year-on-year and 56% below its all-time high of $69,000.

related: $1.9T in Crypto Risks Wiped out Spread on Stocks, Bonds – Stablecoin Tether in Focus

options traders stress

The 25% option delta slant is extremely useful because it shows when bitcoin arbitrage desks and market makers are overcharging for a security to the upside or downside.

If options investors fear a drop in the price of bitcoin, the skew indicator will move above 10%. On the other hand, normalized enthusiasm shows a negative 10% skew.

Bitcoin 30-Day Options 25% Delta Skew: Source: Lavitas

The Skew indicator moved above 10% on April 6, entering the “fear” level as options traders charged more for the downside protection. However, the current 19% level remains extremely bearish and the worst reading was recorded recently for the 25.5% metric.

Although bitcoin’s futures premium was flexible, the indicator shows a lack of interest from (long) leveraged buyers. In short, the BTC options market remains tense and suggests that professional traders are not confident that the current ascending channel pattern will hold.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.