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While Bitcoin acceptance is the, evidence from derivatives reveals that retail and institutional traders remain hesitant to open new bullish positions.
Most investors have been frustrated by Bitcoin’s (BTC) recent price activity, particularly given that the overall altcoin market capitalisation rallied 24% in nine days to hit an all-time peak of $1.35 trillion on May 9.
With altcoins and meme coins pumping to fresh daily highs, Bitcoin’s 62 percent cumulative rise in 2021 leaves BTC traders feeling a little irritated.
Fidelity, a $3.8 trillion global wealth manager, filed a Bitcoin exchange-traded fund (ETF) filing with the US Securities and Exchange Commission on May 10. The Chicago Board Options Exchange (CBOE) and Fidelity’s Wise Origin Bitcoin (BTC) have collaborated, and the SEC’s first response window will close in 44 days.
Palantir (PLTR), a $30 billion data analytics firm founded by billionaire Peter Thiel, revealed on May 11 that it had begun accepting Bitcoin payments. The company is likely to follow in the footsteps of Tesla (TSLA) and MicroStrategy (MSTR) by adding BTC to its balance sheet, and it will have more than $2 billion in cash on hand for acquisitions.
In other news, the proposed Taproot update intends to make complicated transfers less expensive, quicker, and simpler to implement. More specifically, this enhancement will add anonymity to the multisig and time-lock features.
Taproot activation will be approved only if 90 percent of all mined blocks contain an activation signal by August 11.
Despite all of this good news, BTC’s price has not taken its normal bullish shift. The lack of a legal system continues to be the most important immediate barrier. According to Joanna Wasick, a lawyer at law firm BakerHostetler:
“How many people using crypto for payments know exactly what the tax implications are of their payment transactions?”
Retail traders are not demanding excessive leverage for longs
The incredibly low perpetual funding rate is the first indication that traders are fully perplexed. To insure that there are no exchange risk imbalances, futures contracts have an integrated rate that is typically paid every eight hours. Even if the buyers’ and sellers’ open interest is still equal, their leverage will differ.
When longs seek more leverage, they will be the ones to pay the price. As a result, the present condition can be characterised as bullish. The reverse is true as shorts use more leverage, resulting in a negative funding cost.
Take note of how the present 0.02 percent average, which equates to 1.8 percent a month, is far lower than recent peaks. Although specialist traders choose fixed-month calendar futures, retail traders prefer permanent ones because they prevent the inconvenience of expirations. As a result, this data indicates that there has been a loss of appetite since April 17.
The options skew indicator is on the verge of turning bullish
Investors should look at the derivatives markets to help understand how professional traders position themselves. Call options authorise the customer to purchase Bitcoin at a predetermined price before the contract expires. Put options, on the other hand, provide consumers with protection from price declines.
When market makers and professional traders are optimistic, they can claim a higher premium on call (buy) calls, resulting in a negative 25 percent delta skew indicator.
A skew tracker between -10 and +10 is considered neutral, as it has been since April 15. This data demonstrates whales’ and market makers’ balanced risk management of downside and upside risk.
There is no indication that option traders are bullish, in line with today’s price decline. This information is also consistent with the BTC permanent futures markets.
Bitcoin has closed above $50,000 in 65 of the last 66 days, indicating a ‘comfort zone’ for bulls. As a result, as long as this support holds, there is still optimism that Bitcoin will set a new peak.