Pro-traders do not expect Bitcoin to break and hold $20K anytime soon

One hundred and eleven days have passed since Bitcoin (BTC) posted a close above $25,000, leaving some investors feeling less confident that the asset had found a confirmed bottom. At the moment, global financial markets remain unsettled due to the heightened tension in Ukraine following this week’s Nord Stream gas pipeline incident.

The Bank of England’s emergency intervention in government bond markets on 28 September also shed some light on how extremely fragile fund managers and financial institutions are right now. The move marked a sharp shift from the earlier intention to tighten economies as inflationary pressures mounted.

Currently, the S&P 500 is on pace for a third consecutive negative quarter, its first since 2009. Additionally, Bank of America analysts downgraded Apple to neutral, due to the tech giant’s decision to scale back iPhone production due to “weaker demand from consumers”. Finally, according to Fortune, the real estate market has shown its first signs of rebound after home prices fell in 77% of America’s metropolitan areas.

Let’s take a look at Bitcoin derivatives data to understand if the worsening global economy has any impact on crypto investors.

Pro-traders were not thrilled with the rally to $20,000

Quarterly futures are usually avoided by retail traders because of their price differential from spot markets, but they are professional traders’ preferred instruments because they prevent the swings in funding rates that often occur in a perpetual futures contract.

Three-month futures annualized premium, as shown in the chart above, should trade at +4% to +8% in healthy markets to cover costs and associated risks. The chart above shows that derivatives traders have been neutral to bearish over the past 30 days, while the Bitcoin futures premium remained below 2% throughout.

More importantly, the metric did not improve after BTC rallied 21% between September 7th and 13th, matching the failed $20,000 resistance test on September 27th. The data basically reflects the reluctance of professional traders to add to leveraged long (bull) positions.

One must also analyze the Bitcoin options markets to rule out externalities specific to the futures instrument. For example, 25% delta bias is a clear sign when market makers and arbitrage tables are overcharging for upside or downside protection.

In bear markets, option investors place higher odds on a price dump, causing the bias indicator to rise above 12%. On the other hand, bullish markets tend to drive the bias indicator below negative 12%, which means that the bearish put options are discounted.

The 30-day delta bias has been above the 12% threshold since September 21, signaling that options traders were less inclined to offer downside protection. As a comparison, between September 10 and 13, the associated risk was somewhat balanced, according to call (buy) and put (sell) options, indicating a neutral sentiment.

The small number of futures liquidations confirms traders’ lack of surprise

Futures and options calculations suggest that the September 27 Bitcoin price crash was more expected than not. This explains the low impact on liquidations. Despite the 9.2% correction from $20,300 to $18,500, only $22 million of futures contracts were liquidated. A similar price crash on September 19 caused a total of $97 million in leveraged futures liquidations.

On the one hand, there is a positive attitude since the 111-day long bear market was not enough to instill bearishness in Bitcoin investors, according to the derivatives calculations. However, bears still have unused firepower, considering that the futures premium is close to zero. Had traders been certain of a price decline, the indicator would have been in reverse.