According to derivatives data, the price of Bitcoin is still exploring the bottom parts of its trading span, but a fall to $25,000 appears all but certain.

Source: forkast.news

After effectively defending the $25,500 support on June 10, Bitcoin has been trading in a constrained 3.4% range for the last three days. Since the US Federal Reserve will publish its interest rate choice on June 14 at this point, investors' focus has switched to the macroeconomic sector.

Cryptocurrencies may function independently of conventional financial markets, yet practically every investor is impacted by the cost of capital. The Federal Reserve increased its benchmark interest rate in May to a level not seen since 2007. Since markets are estimating a 94% likelihood of a pause at the June meeting, according to the CME FedWatch tool, all eyes will be on Fed Chair Jerome Powell's press conference 30 minutes after the rate announcement.

More Than Simply a FOMC Meeting Is What Crypto Worries

The economy will also need to deal with the U.S. Treasury issuing more than $850 billion in new notes between now and September, so the impending Federal Open Market Committee meeting isn't the only thing to worry about.

Increased government debt issuance often results in higher yields and, consequently, greater borrowing costs for businesses and households. The likelihood that gross domestic product growth would be seriously hampered in the upcoming months is high, given the already constrained credit market brought on by the recent financial crisis.

Annualized premium for 2-month Bitcoin futures. Source: Laevitas

Since the beginning of June, miners have reportedly begun selling Bitcoin, potentially putting more pressure on the price. Reduced revenues from a slowdown in Ordinals activity and an all-time high in the mining hash rate are two possible reasons. Investors are intently watching Bitcoin futures contract premiums and the costs of hedging using BTC options as they wonder whether Bitcoin will test the $25,000 barrier, a level unseen since mid-March.

Bitcoin Derivatives Exhibit Marginal Growth

Whales and arbitrage desks are fond of Bitcoin quarterly futures. These fixed-month contracts do, however, generally trade at a little premium to spot markets, suggesting that sellers are requesting a higher price in order to postpone settlement. Therefore, in healthy markets, BTC futures contracts should trade at a 5 to 10% annualized premium, which is a condition known as contango and is not exclusive to crypto markets. As the futures contract premium grew to 3% from 1.7% on June 10, the demand for leveraged BTC longs has somewhat grown, while it is still much below the neutral 5% level.

In order to determine if the recent downturn has resulted in investors becoming more bullish, traders need also examine the options markets. When exploitation firms and market makers overpay for upside or downside protection, the 25% delta skew is a telltale indication. In other words, the skew indicator will increase over 7% if traders expect a decline in the price of Bitcoin, whereas enthusiasm periods often have a minus 7% skew.

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.