Bitcoin's Price Has Dropped To Its Lowest Point In Two Months Yet Derivatives Markets Indicate Sustained Trader Interest

Bitcoin's price remains below $60,000, yet strong activity in derivatives and stablecoins indicates enduring trader optimism.

Source:temizenerji.org

Despite briefly touching $63,800 on July 1, Bitcoin experienced a notable downturn, hitting a low of $56,746 by July 4, marking an 11% decline from its recent peak. Despite efforts to reclaim the $58,000 support level, Bitcoin's price remains 21.5% lower than its record high of $73,757 set on March 14. However, robust demand for Bitcoin derivatives and stablecoins in China suggests that traders are unwilling to retreat, suggesting the potential for the bull market of 2024 to persist.

BTC's Price Plummeted While The S&P 500 And Gold Approach Their All-Time Highs

The S&P 500 index reached a new all time high on July 3, while gold remained just under 4% away from its record high of $2,450 on May 19. The stock market surge has been fueled by strong corporate earnings surpassing expectations and increasing anticipation of interest rate cuts by the US Federal Reserve throughout 2024. This context highlights that the downturn in the cryptocurrency market is not correlated with broader demand for risk on assets or alternative investments.

Additionally, the US 5 year Treasury yield has held steady at 4.33% for the past four weeks, indicating no movement towards a flight to quality scenario where investors typically turn to safer assets. Typically, this would result in lower yields as demand for government backed bonds rises amidst inflation concerns driving traders towards higher returns. However, such trends have not materialized recently, leaving Bitcoin's recent 19% decline over four weeks unsupported by broader macroeconomic trends. Despite significant selling pressure, Bitcoin whales and market makers have shown resilience, as indicated by two key derivatives metrics.

Bitcoin Derivatives Metrics Remain Neutral Amid Increased Stablecoin Demand in China

Professional traders often prefer monthly contracts due to their lack of funding rates. In neutral markets, these contracts typically trade at a premium of 5% to 10% to compensate for their longer settlement periods. On July 4, BTC futures premium dipped to 7.5%, staying within neutral territory. The premium briefly surpassed the 10% bullish threshold on July 2, lasting less than four days. Currently, it mirrors the period between June 21 and June 24, following a 12 day correction of 15%.

Monitoring options markets provides insights into investor sentiment. A 25% delta skew above 8% indicates bearish sentiment, while below -8% signals optimism. Presently, the BTC options 25% delta skew stands at 0%, indicating balanced pricing between call and put options. Though this reflects reduced confidence compared to the prior week's -5%, it remains within neutral bounds. This suggests no urgent need for hedging via Bitcoin options.

To gauge broader market sentiment, stablecoin demand in China is crucial. Typically, high retail demand causes stablecoins to trade at a premium of 2% or more above the official USD rate. A discount usually indicates bearish sentiment. On June 28, China's USDC stablecoin premium dropped below 1%, indicating a rush to liquidate crypto holdings. However, by July 4, the premium rebounded to 1.8%, signaling renewed buying as traders convert fiat CNY into stablecoins. 

Given these factors, with Bitcoin derivatives showing no bearish signals, confidence strengthens that BTC could soon reclaim the $60,000 support level.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.