Here’s Why Derivatives Traders Don’t Flinch Despite Bitcoin Price Drop
The price of Bitcoin (BTC) corrected 9% in the early hours of September 19, falling to $18,270. While the price quickly rebounded above $19,000, this level was the lowest seen in three months.
Despite this, the pro traders held their ground and did not take the losses as measured by derivatives contracts.
The 9% crash had no impact on BTC derivatives metrics
There is no definitive explanation for the crash, but some think that US Vice President Joe Biden’s interview on CBS “60 Minutes” led to concerns about global conflict.
On the other hand, the price difference between quarterly futures and spot markets usually discourages retail traders, but professional traders prefer them because they prevent funding rate fluctuations that often occur in perpetual futures contracts.
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As the Bitcoin futures premium held below 2% the entire two weeks, derivatives traders had been neutral to bearish during the period that this indicator should trade at a premium of 4% to 8% to cover costs and risks.
It is also important to note that the shakeout on Sept. 19 had no significant impact on the indicator, which currently stands at 0.5%.
Professional traders are unwilling to add leveraged short (bear) positions at current prices, according to this data.
It All Depends on Macroeconomics and Global Problem
A derivatives metric suggests that the drop in Bitcoin price on Sept. 19 was partly expected, which helps explain the short time it took which was less than two hours to regain the $19,000 support.
All of this won’t matter if the Fed raises rates above consensus or if stock markets collapse further because of the energy crisis and political tensions.
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Therefore, before attempting to pinpoint the ultimate bottom of the current bear market, traders should monitor macroeconomic data and central bank attitudes.
Due to the weak demand for leverage longs on BTC futures, the odds of Bitcoin testing sub-$18,000 remain high.
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