Bitcoin bulls aim to flip $30,000 for support, but derivatives data shows traders lack confidence

Bitcoin (BTC) has rebounded 19% from its low of $25,400 on May 12, but is investor confidence in the market restored? Judging by the formation of the ascending channel, it is possible that the bulls have at least plans to retake the $30K level in the short term.

Bitcoin / USD 4 hour rate on Bitstamp. Source: TradingView

Does Derivatives Data Support a $30K Recover, Or Is Bitcoin Possible to Head for Another Downside After Failing to Break Above $31,000 on May 16th?

Bitcoin price falters in the face of regulatory fears and terra disaster

One factor pressuring the BTC price could be the Luna Foundation Guard (LFG) selling 80,081 Bitcoin, or 99.6%, of their position.

On May 16, LFG released details about the remaining collateral for cryptocurrency and on one side, the risk of selling this project has been eliminated, but investors are skeptical about the stability of other stablecoins and Decentralized Finance (DeFi) applications.

Recent remarks from FTX CEO Sam Bankman-Fried on environmental issues and the scalability of Proof of Work (PoW) mining reinforced the current negative sentiment. According to Bankman-Fried, using Proof of Stake (PoS) consensus is best suited to accommodate millions of transactions.

On May 14, a local newspaper in the UK reported the Treasury’s intention to regulate stablecoins across Britain. According to the Treasury spokesperson, the plan does not include legalizing stable algorithms, and instead favors fully backed stablecoins in a 1:1 ratio.

While this news has affected market sentiment and the price of bitcoin, let’s take a look at how the big traders are positioning themselves in the futures and options markets.

Bitcoin futures premium shows resilience

The basis index measures the difference between long-term futures contracts and the current levels of the spot market. The annual premium for Bitcoin futures contracts should be between 5% and 10% to compensate traders for “locking in” funds for two to three months until the contract expires. Levels below 5% are bearish, while numbers above 10% indicate excessive demand from long positions (buyers).

Annuity for 3-month Bitcoin futures contract. Source: Laevitas

The above chart shows that the Bitcoin core index moved below the neutral 5% threshold on April 6, but there was no panic after the sell-off to $25,400 on May 12. This means that the scale is moderately positive.

Although the underlying indicator is showing bearish tendencies, one must remember that Bitcoin is down 36% year-to-date and 56% below its all-time high of $69,000.

Related: Survey of $1.9 Trillion of Crypto Risk Extends to Stocks and Bonds – Tether Fixed in Focus

Options Traders Are Out Of Stress

The 25% options delta skew is very useful because it appears when market makers and Bitcoin arbitrage desks are protecting against a rally or a fall.

If options investors fear a bitcoin price crash, the skew indicator will move above 10%. On the other hand, generalized excitation reflects a negative deviation of 10%.

Bitcoin 30-day options 25% delta skew: Source: Laevitas

The skew indicator moved above 10% on April 6, and entered the “fear” level because options traders are charging more for protection against the decline. However, the current level of 19% is still very bearish and the last reading of 25.5% was the worst reading ever recorded for this metric.

Although the Bitcoin futures premium has been resilient, the indicator shows that buyers are not interested in leverage (buy trades). In short, the BTC options market is still compressed and indicates that professional traders are not confident that the current bullish channel pattern will continue.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your research when making a decision.