Bitcoin derivatives data shows that a BTC price pump above $18K will not be easy

Traders can now rejoice that the price of bitcoin has risen above $17,400, but it has been 27 long days since Bitcoin (BTC) last breached the $17,250 resistance.

On December 13, after two weeks of sideways movement, Bitcoin showed a 6.5% rally towards $18,000, and while the current move still lacks strength, traders believe a retest of the $18,250 resistance is possible.

Bitcoin 12-hour price index, USD. Source: TradingView

To start the week, the S&P 500 hit a 26-day high on January 9. Weak economic data had earlier fueled investors’ expectations of a slower interest rate hike by the US Federal Reserve and the January 12 Consumer Price Index. CPI) report may lend some credence to this expectation.

On January 6, German retail sales data showed a 5.9% year-on-year decline in November. Economic activity in the US services sector contracted in December after 30 consecutive months of growth. The Services Purchasing Manager’s Index (PMI) was 49.6%, and readings below 50% usually indicate a weakening economy.

Investors are eagerly awaiting the January 12 Consumer Price Index (CPI) release, which is more likely to dictate whether the Fed will raise interest rates by 25 basis points or 50 basis points in early February. Economists expect the report to show inflation rose 6.6% in the 12 months to December, so a weaker-than-consensus CPI could further boost markets’ performance.

However, the effects of a year-long bear market continue as digital asset manager Osprey Funds plans to lay off most of its staff in the second half of 2022. The investment company offers crypto products for the brokerage accounts of its accredited investors, including a trust.

Analysts should keep an eye on Bitcoin derivatives to understand if the recent positive price action has finally turned cryptocurrency investor sentiment positive.

The futures premium suggests that sentiment is slowly improving

Retail traders typically avoid quarterly futures because of the price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the financing rates from changing in a fixed futures contract.

The annual premium on two-month futures should trade between +4% and +8% in healthy markets to cover costs and associated risks. So when futures trade below such a range, it indicates lack of confidence from leverage buyers – usually a bearish indicator.

Bitcoin 2 month futures annual premium. Source:

The chart above shows positive momentum for the Bitcoin futures premium recovering from a 3% discount on December 30th to a positive 1% today. Although still in neutral-bearish territory, Bitcoin represents less pessimism than it did on December 13, before the price rose to $18,000. However, the requirement for leverage is at $17,000, just shy of the metric.

Before jumping to conclusions, traders should also analyze Bitcoin options markets to rule out externalities inherent in the futures instrument.

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Options assess similar risks for upside and downside

A 25% delta curve is a sign that market makers and arbitrage tables are overloaded for upside or downside protection.

In bear markets, option investors place higher odds on price declines, causing the skew to rise above 10%. On the other hand, bull markets tend to pull the skewness indicator below -10%, meaning that low-priced put options are discounted.

Bitcoin 60 day options 25% delta curve: Source:

On January 9, the delta curve dipped to 8%, indicating that options traders assess similar risks to the upside and downside. More importantly, the current level is the lowest since November 8, or the FTX exchange implosion.

Even if there is no appetite for long-term leverage using Bitcoin futures, whales and market-makers’ trading options are becoming more comfortable with the $17,000 support.

While there is no evidence that a pump to $18,250 is in the works, at least traders are less risk averse, according to derivatives.

The views, opinions and opinions expressed herein are solely those of the authors and do not reflect or represent the views and opinions of Cointelegraph.

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