Author: Marcel Pechman, CoinTelegraph; Translated by: Deng Tong, Jinse Finance
On October 21, Bitcoin's price fell to $67,000, erasing gains from the previous three days. Some analysts suggest that one reason for the pullback is that investors reduced their exposure to Bitcoin due to concerns about traditional market impacts. However, indicators for Bitcoin derivatives remain very stable.
Despite concerns that many economies may lose momentum or that confidence in government debt refinancing capabilities is waning, demand for Bitcoin derivatives as a hedge remains stable. If whales or arbitrageurs expect further declines, these indicators will reflect greater volatility.
Bitcoin futures show no signs of bearish bets
In a neutral market, Bitcoin futures premium typically ranges from 5% to 10%, only slightly affected on October 21. The rise in monthly BTC futures prices reflects an extension of the settlement period, with premiums above 10% indicating bullish sentiment.
Bitcoin 2-month futures annualized premium. Source: laevitas.ch
The annualized premium (base rate) for October remains above 9%. On the 21st, Bitcoin retested the $67,000 support level. However, it is important to confirm whether this sentiment is limited to the Bitcoin futures market before drawing conclusions. Based solely on price charts, Bitcoin's price movement seems to reflect intraday performance of the stock market.
S&P 500 futures (green) vs. Bitcoin/USD (blue). Source: TradingView
Arif Husain, head of fixed income at T. Rowe Price, told Bloomberg that U.S. 10-year Treasury yields 'will test the 5% threshold in the next six months' due to rising inflation expectations and concerns over government fiscal spending. As investors sell bonds, yields rise, indicating that traders are seeking higher returns.
Husain noted that the government will 'issue a large amount of new debt' to the market, while the Federal Reserve attempts to shrink its balance sheet to curb inflation and prevent the economy from overheating. The annual cost of U.S. debt interest has exceeded $1 trillion, prompting central banks to consider lowering interest rates.
Bitcoin prices have not decoupled from stocks
In the uncertain macroeconomic environment, fear, uncertainty, and doubt (FUD) significantly impact Bitcoin's price trend.
Although Bitcoin is generally considered uncorrelated with traditional markets (having shown periods of complete decoupling from the S&P 500), the 40-day correlation over the past month remains above 80%, indicating a close relationship between the two asset classes.
Bitcoin 40-day correlation with S&P 500 futures. Source: TradingView
Unlike the negative or negligible correlation between Bitcoin and the S&P 500 from mid-July to mid-September, recent data suggests both markets are driven by similar factors. The correlation between Bitcoin and gold has increased, exceeding 80% on October 3, further supporting this hypothesis.
The Bitcoin options market also reinforces the argument for derivatives resilience. The 25% Delta skew indicator suggests that put (sell) options are trading at a discount compared to equivalent call (buy) options.
Bitcoin 1-month option skew, put options. Source: Laevitas.ch
Generally, a deviation between -7% and +7% is considered neutral, with the current indicator at the border of neutral to bullish market.
In short, derivatives traders have not reacted with panic to Bitcoin's recent price drop. If traders expect prices to fall further, then the deviation will shift towards zero or higher. Overall, Bitcoin derivatives continue to show resilience.
