Bitcoin price data suggests bulls will succeed in holding $30K as support this time

Bitcoin (BTC) experienced a 24.3% surge between June 15 and June 23, which caught many people by surprise. This resulted in bears having to endure $165 million in short futures contract liquidations, but it also caused some degree of unease among investors who are using Bitcoin derivatives, as the rally was unanticipated. Consequently, BTC has been trading at a price higher than $31,000.

The recent 50-basis-point interest rate increase by the Bank of England, followed by similar moves in Norway and Switzerland, has brought inflation to the forefront of traditional markets, leading to the highest cost of capital in over a decade for the region.

At a hearing of the United States House Financial Services Committee on June 21, Federal Reserve Chair Jerome Powell declared that there is still a long way to go to bring inflation back down to 2%, and he reiterated that almost all members of the Federal Open Market Committee (FOMC) anticipate that interest rates will be increased further by the end of the year.

JPMorgan strategists, led by Marko Kolanovic, believe that the economy’s recent strength could postpone a recession, meaning the effects of the central bank’s monetary tightening have yet to be seen. Ultimately, a recession may be required to bring inflation back to its target.

Investors are now wondering if Bitcoin has the capability to remain above the $30,000 mark in the face of bearish pressure stemming from a possible economic downturn and central bank efforts to reduce the demand for capital.

Hence, traders should vigilantly observe premiums on Bitcoin futures contracts and the expenses of hedging through BTC options.

Bitcoin derivatives show modest improvement

Quarterly futures of Bitcoin are widely favored by whales and arbitrage desks. Nevertheless, these contracts with predetermined expiry months generally trade at a higher price than spot markets, implying that sellers are demanding a higher payment for the deferment of settlement.

The result is that BTC futures contracts in healthy markets should be priced at a 5% to 10% annualized premium – a phenomenon referred to as contango, which is not exclusive to crypto markets.

The demand for leveraged Bitcoin longs rose slightly as the futures contract premium rose to 4.3% on June 22 from 3.2% the week before, even though it is still below the neutral 5% mark.

Traders should also evaluate the options markets to determine if the recent correction has resulted in increased optimism among investors. The 25% delta skew can be an indication that arbitrage desks and market makers are charging too much for either upside or downside protection.

If traders expect the price of Bitcoin to decrease, the skew metric will be greater than 7%, and during periods of enthusiasm, the skew is usually negative at 7%.

On June 16, the 25% delta skew metric made a full reversal as Bitcoin’s price regained the $26,000 mark. The indicator kept getting better until June 22, reaching a moderate “greed” sentiment of -8% skew.

An analysis has revealed that investing solely in Bitcoin and holding it for the long term outperforms investing in altcoins.

The absence of excessive optimism is a good sign

Generally, a 4.3% futures basis and a negative 8% delta skew would be thought of as neutral market signals, however that is not the situation considering the 21.5% Bitcoin price surge from June 15 to June 22. It is beneficial for purchasers utilizing derivatives contracts to have a certain level of doubt, and this leaves space for additional leverage if necessary.

The ongoing legal dispute between Binance and the U.S. Securities and Exchange Commission poses a threat to BTC futures contracts. The rulings from the U.S. District Court for the District of Columbia could have a major effect on the crypto market, given that Binance has the largest market share in the spot and derivatives markets.

The crypto regulatory environment’s uncertainty and the increasing likelihood of an economic recession could be possible reasons for Bitcoin derivatives traders’ lack of enthusiasm.

Apart from the potential for external risks, there is no clear reason for a major decrease in the price of BTC, giving bulls the confidence to sustain the positive trend.

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