According to BTC futures and options markets, the $50,000 target of Bitcoin bulls is still valid.
Bitcoin price continues to trade below its 2023 high, a sign that investors may have underestimated the strength of the $44,000 resistance. Even though BTC price is trading below $42,000, this does not mean that reaching the $50,000 target is no longer possible. In fact, the opposite seems more likely to happen. Looking at Bitcoin derivatives data, it is clear that investors ignored the 6.9 percent decline and remained optimistic, but is this optimism enough to prove that further increases will occur?
Although the liquidation of $127 million in long positions on December 11 seems significant, this amount does not even constitute 1 percent of open positions. However, it is undeniable that liquidations triggered a 7 percent correction in less than 20 minutes.
Bitcoin's decline was accelerated by derivatives in the short term
It can be said that derivative markets have played a significant role in the recent downward price movement, but this assessment ignores the fact that the price of Bitcoin, which dropped to $ 40,200 on December 11, increased by 4.2 percent in the following six hours. Essentially, the impact of strong liquidations has long since disappeared, disproving the idea of declines caused solely by futures markets.
To determine the trend of Bitcoin whales and market makers, investors should examine the Bitcoin futures premium, also known as the base rate. Professional traders prefer monthly contracts because of their fixed rates. In neutral markets, these instruments trade at a premium of between 5 percent and 10 percent to account for extended contract periods.
Data reveals that BTC futures premium barely fluctuated despite the 9 percent price drop on December 11, remaining above the neutral-bullish threshold of 10 percent. If there was significant oversubscription for shorts, this metric would have to drop to the 5 percent to 10 percent range.
Investors should also analyze the options markets to understand whether the recent correction has dampened investor optimism. The 25 percent delta skew is an important indicator when arbitrage institutions and market makers charge excessive fees for upside or downside protection.
If investors expect a decline in Bitcoin price, the skew rate will increase above 7 percent. In the opposite case, this value will be negative 7 percent.
As shown above, BTC options have been trending neutral since December 5, providing a balanced cost for both call and put options. Although this situation does not seem as optimistic as previous weeks when put options were traded at a 10 percent discount, it at least shows that the correction experienced since December 10 has been resisted.
Individual investors are bullish despite the fluctuations in Bitcoin
After considering the two most suitable indicators for institutional investment, it should be analyzed whether individual investors using leverage influence the price movement. Perpetual contracts, also known as inverse swaps, contain an embedded rate that is recalculated every eight hours.
A positive ratio indicates increased demand for leverage among long positions. Note that the data shows a small increase to 0.045 percent between December 8 and December 10, equivalent to a weekly increase of 0.9 percent. At this rate, there is no reason for most investors to hedge their positions.
Considering that the price of Bitcoin has increased by 52 percent since October, this data looks quite healthy. This shows that the leverage of individual investors did not trigger the rally and subsequent liquidations.
Whatever caused the price to rise to $44,700 and then drop to $41,300, it appears to be mainly due to the spot market. Although this does not mean that the bottom has been reached, it significantly reduces the possibility of gradual liquidation due to excessive optimism related to the spot exchange-traded fund (ETF) expectation.
Essentially, this is good news for Bitcoin bulls. Derivatives show that positive momentum is not lost despite the price correction.
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