Bitcoin (BTC) appears to be lacking the strength to test its all-time high of $67,000 reached on October 20, leaving investors questioning whether the bullish moment is over. Although the price is facing these hurdles, it is still too early to call the test of the $58,000 support level the start of the descending channel.
Bitcoin price in US dollars on Coinbase. Source: TradingView
Among the factors limiting growth is regulatory uncertainty in the United States. Ann Terme, partner in government enforcement and investigation practices at Bracewell LLP and former lead attorney for the CFTC, said the agency “has no easy answers” to providing clear rules.
On the other hand, the increasing prevalence is forcing traditional banks to look for product offerings for cryptocurrency. For example, the huge Russian private bank Tinkoff, the owner of large online brokerage services, is looking at investment services related to cryptocurrency, although the Bank of Russia is blocking such launches.
Coinbase ranked as the most downloaded app for the Apple Store in the US this week, which is unbelievable. Coinbase has outpaced tech giants like TikTok, YouTube, and Instagram with a small feat. Coinbase first appeared on the App Store in 2014 and was the most popular download in the US in 2017 and May 2021.
Professional traders stumbled, but are optimistic again
To determine if professional traders are in an uptrend or downtrend, you should monitor the futures premium, also known as the “base price”.
The index measures the difference between a long-term futures contract and the current price in the spot market. In healthy markets, the annual premium is expected to be 5-15%, also known as contango.
This price gap is caused by participants asking for more money to postpone settlements for a longer period, and when this indicator disappears or becomes negative, a red warning is displayed, known as “reverse transition”.
Base price of 3-month bitcoin futures contract. Source: Laevitas
Notice how the sharp drop caused by the $58,000 test of resistance on October 27th brought futures premiums to a three-week low. With that said, the index has rebounded well to 17% today, indicating a moderate uptrend.
The options markets should also be analyzed to confirm whether this movement is specific to a particular instrument.
A delta slope of 25% compares similar call (buy) and sell (sell) alternatives and becomes positive when fear prevails. This position reflects the value of protective call options which are higher than similar risky call options.
The opposite move continues when the market makers are bullish, causing the 25% delta skew indicator to turn into negative territory. Values ranging from negative 8% to positive 8% are generally considered neutral.
Alternatives to Deribit Bitcoin 25% Delta Shift. Source: laevitas.ch
The delta deviation of 25% has been in the neutral zone since September 30th. The latest decline on October 25 was negative at 6%, which is not enough to be considered moderate optimism. However, even the 12.5% correction of Bitcoin from $66,600 on October 21 to $58,200 on October 28 was not enough to create fear among professional traders.
Although there are no bearish signs in the Bitcoin derivatives market, bulls should be concerned about a possible downside channel from October 19th. If this move is further confirmed, traders should expect the $60,000 resistance level by November 12th.
Professional traders are not currently showing any signs of nervousness, so a correction after a 33% rally in three weeks that led to a record high of $67,000 on October 20 should not be a problem.