Bitcoin's price momentum has weakened since the spike on October 29, reaching an all-time high. However, the derivatives market continues to reflect traders' optimism about price recovery prospects.

Analysis of the future market and Bitcoin options shows that traders are maintaining positions without over-leveraging, which is crucial for a sustainable rise to new highs. However, understanding the reasons behind Bitcoin's drop below $69,000 on November 1 remains essential.

The delta skew of 1-month Bitcoin options, put-call | Source: Laevitas.ch

When there are high expectations for Bitcoin price decreases, the 25% delta skew index tends to exceed 7%, indicating that put options are priced higher due to increased demand.

The Bitcoin derivatives market remains stable despite the price drop.

To assess whether trader sentiment has weakened after the recent drop, the funding rate of perpetual contracts can be analyzed. A neutral funding rate, with no cost for bullish leverage, indicates a lack of strong conviction, while a rate exceeding 2.1% per month indicates excessive optimism.

8-hour funding rate for Bitcoin perpetual futures | Source: Coinglass

On November 1, there was no significant impact on leverage demand, with a rate of 0.01% every 8 hours, equivalent to about 0.9% per month, typically considered neutral.

There are no signs that leverage was the main driver behind the price increase of Bitcoin from $67,000 to $73,500 during the period from October 27 to 29, indicating a healthy market trend. Overall, the Bitcoin derivatives market supports a sustainable bullish market, potentially paving the way for further increases.

Many factors influence investor sentiment

From a trading perspective, securing profits ahead of major political and economic events may explain Bitcoin's recovery to $71,000 on November 1, closely related to the volatility of the S&P 500 index, indicating that both markets are reacting to similar macroeconomic indicators.

S&P 500 futures (left) compared to Bitcoin/USD (right) | Source: TradingView

In the short term, when there is a risk of recession, traders often shift to cash and treasury bonds for safety. This pattern helps explain the recent decline in the stock market and Bitcoin after Intel reported a 6% decline in quarterly revenue compared to the same period last year.

Recent financial reports from tech giants like Microsoft and Meta reveal increased investment in AI, lowering profit growth expectations. This news comes after Super Micro Computer (SMCI) stock dropped 44% in three days following the surprise withdrawal of Big4 auditor EY from its auditor role.

Market sentiment changed somewhat on November 1 when the U.S. Bureau of Labor Statistics announced that job growth was only 12,000 in October, lower than the forecast of 100,000.

Additionally, wages in the U.S. increased by 0.4% compared to the previous month, raising concerns about inflation. Despite this, market analysts are betting on a 0.25% rate cut from the Fed on November 7 through the CME FedWatch tool.

Events such as the U.S. presidential election on November 5 and the Federal Open Market Committee (FOMC) decision could have significant impacts. Political trends aimed at stimulating the economy often lead to the depreciation of the U.S. dollar, which may drive Bitcoin prices up in the medium term.



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