Bitcoin (BTC) failed to maintain a level above $85,000 on March 14th despite a 1.9% increase in the S&P 500 index. More importantly, it’s been over a week since Bitcoin last traded at $90,000, urging traders to question whether the bull market is really over and how long the sales pressure will last.
Bitcoin base rate rebounds from bearish levels
From a derivatives perspective, Bitcoin metrics show resilience despite a 30% drop from an all-time high of $109,354 on January 20th. This measured the premium on monthly contracts in the Spot Market and recovered to health levels after a temporary signal of bearish feelings on March 13th.
Bitcoin 2-month futures contract involves annual insurance premiums. Source: laevitas.ch
Traders usually request an annual premium of 5% to 10% to compensate for the longer settlement period. This sub-threshold base rate indicates weak demand from leveraged buyers. The current 5% rate is lower than the 8% recorded two weeks ago, but remains within the neutral territory.
Central banks will ultimately raise BTC prices
Bitcoin’s price action closely tracks the S&P 500, suggesting that factors that drive risk aversion for investors may not be directly linked to top-level cryptocurrencies.
However, this also challenges the idea of ​​Bitcoin as a non-correlated asset, at least in the short term, as its price behavior is more closely aligned with traditional markets.
S&P 500 futures (left) vs Bitcoin/USD. Source: TradingView / Cointelegraph
If Bitcoin prices rely heavily on stock markets that are under pressure due to the fear of economic recession, investors could continue to reduce their exposure to risk-on assets and move to short-term bonds for safety.
However, central banks are expected to implement stimulus measures to avoid a recession, and as a result, rare assets like Bitcoin could end up outperforming.
The market is priced below 40% of US interest rates, below 3.75% from the current baseline, according to the CME FedWatch tool, ahead of the FOMC meeting on July 30th.
Nevertheless, Bitcoin will need to regain its $90,000 level as soon as the S&P 500 has a portion of its recent 10% loss. However, in the worst case scenario, panic sales of risk-on assets could continue.
Under these conditions, BTC could continue to suffer performance in the coming months, particularly if Spot Bitcoin Exchange-Traded Funds (ETFS) continues to experience significant and sustained net spills.
Bitcoin derivatives show no signs of stress
Professional traders are currently not actively using Bitcoin options for hedging, as shown by the 25% Delta Skew metric. This means that few market participants expect BTC prices to retest the $76,900 level any time soon.
Bitcoin Month Options 25% Delta Skew (Put-Call). Source: laevitas.ch
Bullish sentiment usually leads to a put (sell) trading (sell) at a discount of 6% or more. In contrast, the bearish period increases the indicator to a 6% premium, as seen briefly on March 10th and March 12th. However, 25% delta skew has recently remained within neutral range, reflecting healthy derivative markets.
It is important to look into the BTC margin market to better assess trader sentiment. Unlike derivative contracts where there is always a balanced balance between long (buyers) and shorts (sellers), margin markets force traders to borrow Steve Coin to buy spot Bitcoin. Similarly, bearish traders can borrow BTC to open short positions and bet on price drops.
Long Bitcoin margin ratio in OKX. Source: OKX
The long margin ratio for Bitcoin on OKX shows that it is longer than the shorts by 18 times. Historically, excessive confidence has pushed this ratio by over 40 times, but levels that prefer longs below 5 times are considered bearish. The current ratio reflects the sentiment on January 30th, when Bitcoin exceeded $100,000.
There are no signs of stress or bearishness in the Bitcoin derivatives or margin market, particularly after the liquidation of over $920 million in long-term contracts over the seven days of March 13th.
Therefore, given the resilience of investors’ sentiment, Bitcoin could potentially regain the $90,000 level in the coming weeks, as the recession easily takes risks.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
