Originally published on: November 02, 2024
After reaching $68,632 earlier in the week, Bitcoin’s price has slightly retreated, but the derivatives market indicates that traders remain optimistic about a potential price recovery.
Analyzing Bitcoin futures and options markets reveals that traders are holding positions without excessive leverage, a positive sign for sustained growth towards new all-time highs. However, understanding the cause of Bitcoin’s recent drop below $69,000 on Nov. 1 is crucial.
When there is a high expectation of a Bitcoin price decrease, the 25% delta skew metric typically rises above 7%, indicating that put options are in demand and priced at a premium.
Assessing trader sentiment post-downturn, analyzing perpetual contracts’ funding rates is helpful. A neutral funding rate suggests a lack of strong conviction, while rates above 2.1% indicate excessive optimism.
On Nov. 1, the funding rate was minimal at 0.01% every 8 hours, or 0.9% per month – considered neutral. This suggests leverage hasn’t been the primary driver of recent rallies, which is a positive sign for market health.
Bitcoin’s recovery to $71,000 on Nov. 1 coincides with movements in the S&P 500 index, reflecting similar reactions to macroeconomic indicators across markets.
In times of economic uncertainty, traders often seek safety in cash and Treasury bills, causing declines in both the stock market and Bitcoin following concerning financial reports from major companies.
With upcoming events like the US presidential elections and anticipated Federal Reserve decisions, closely monitoring these developments could impact market trends, potentially affecting Bitcoin’s price in the medium term.
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