Despite Bitcoin’s 14% decline, experienced traders are cautiously optimistic

Written by Rock Buivy

Post Date: 8 Mar, 24

Despite the 14% intraday correction, derivatives measures remain neutral-to-bearish, despite the huge sell-off of Bitcoin that stunned investors today.

Following a 14% price correction to an all-time high of $69,150 on March 5, bitcoin now trades at $59,300. Recovering the $64,000 in support will now be the difficult part.

Despite the short-term volatility of today, professional traders are still modestly bullish, based on data from BTC derivatives.

The Nasdaq 100 index had a retracement after the bitcoin price fall

It’s interesting to note that the tech-heavy Nasdaq-100 index futures, which reached an all-time high of 18,377 on March 4, experienced a 2.6% retracement at the same time as Bitcoin’s decline.

Early indications of stress were seen in the stock market after a consumer research firm estimated that Apple iPhone sales in China had dropped by 24%.

Additionally, after the lender replaced its CEO, New York Community Bancorp (NYCB) shares declined further, citing “material weaknesses” in internal controls.

Gold gained 4.2% in four days, and investors fled to the precious metal, which is currently trading close to its all-time high.

Due to the media’s interest, Bitcoin has reached a new all-time high.

“The recent market dynamics are intriguing. While the Nasdaq-100 index futures hit a record high, Bitcoin saw a notable decline, hinting at a correlation between tech-heavy stocks and cryptocurrency movements.”

This might lead whales to think about shorting the cryptocurrency – betting against the price – or encourage holders to cut their positions in response to the typical disinformation from opponents.

On February 28, for example, the funding rate on Bitcoin perpetual contracts attracted attention when it exceeded 1% weekly.

However, as user @bitcoinmunger on the X social network pointed out, this indicator has been showing investors’ optimism for the previous few months.

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Before the milestone high, experienced Bitcoin traders weren’t particularly excited

To put it simply, it is illogical to blame the funding rate alone for the recent significant decline in the price of Bitcoin, since this indicator can remain above 1% weekly for a considerable amount of time without necessarily compelling bulls to sell their long positions.

Because of the favourable market conditions, some traders do not worry about the costs, while others do not have access to traditional funding.

Moreover, since bitcoin investors are inherently positive, retail traders shouldn’t act as a stand-in for heated markets.

Expert traders, on the other hand, typically prefer monthly future contracts in order to steer clear of changing funding rate expenses.

Because of their longer settlement term, these securities trade at a premium of 5% to 10% in neutral markets.

According to data, the BTC futures premium remained around 15% for the duration of the March 5 price increase of $5,765.

In essence, the statistic suggests that there won’t be much of an impact if $62,000 or $64,000 turns into a support, indicating that whales and market makers are still positive despite the downturn that followed the all-time high.

Furthermore, even at the all-time high, the BTC futures premium did not surge above20%, suggesting cautious optimism among traders.

It is important to evaluate the Bitcoin options measures in order to eliminate externalities that might only affect futures markets.

When market makers and arbitrage desks overcharge for upside or downside protection, the 25% delta skew is a clear sign.

The 25% delta skew, as shown above, is -7%, which puts it in the zone between neutral and bullish markets.

Notably, on February 19, when the indicator hit -12%, there was the last incidence of excessive excitement among Bitcoin option traders.

Consequently, the options market lends credence to the idea that experienced traders are still not persuaded that Bitcoin will surpass $70,000 anytime soon.

Historically, investors have taken solace in short-term bonds and cash positions during unsettled times. This explains why there isn’t a lot of overconfidence when Bitcoin reaches a record high.

This time, though, might be different because some capital from gold has been grabbed by the spot Bitcoin exchange-traded fund (ETF) influx.

This raises the likelihood that, regardless of how traditional markets perform, the price of Bitcoin may maintain its current momentum.

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