Bitcoin experienced a 4.9% correction in the four days following its failure to break the $28,000 resistance on October 8th. Derivatives metrics indicate that fear is dominating sentiment in the market. However, despite this correction, Bitcoin has held up well when compared to other assets such as gold and Treasury Inflation-Protected bonds (TIP). Bitcoin has maintained its position at $27,700, outperforming these traditional finance assets.
Investors who are concerned about the recent price rejection at $28,000 should analyze BTC derivatives metrics to determine if bears are in control. Treasury Inflation-Protected Securities, which are U.S. government bonds designed to protect against inflation, have seen their value rise with increasing inflation. However, Bitcoin’s recent performance should not be cause for dissatisfaction.
Bitcoin enthusiasts may not be completely satisfied with its current $520 billion market capitalization, despite surpassing the market capitalizations of Visa and Exxon Mobil. This bullish expectation is based partly on Bitcoin’s previous all-time high of $1.3 trillion in November 2021.
The DXY index, which measures the U.S. dollar against foreign currencies, is nearing its highest level in 10 months. This indicates confidence in the resilience of the U.S. economy, which may reduce interest in alternative hedge instruments like Bitcoin.
Although the S&P 500 index has seen 3% gains since June, the top 25 companies hold a combined $4.2 trillion in cash and equivalents, making stocks a hedge rather than a risk-seeking venture.
When analyzing BTC derivatives metrics, Bitcoin’s future contract premium, also known as the basis rate, has reached its lowest level in four months. This indicates reduced appetite for leverage buyers. Additionally, the 25% delta skew, which measures the market’s expectation of future Bitcoin price movements, has switched to “fear” mode, with protective put options trading at a 13% premium compared to similar call options.
These derivatives metrics suggest that traders are becoming less confident, potentially due to the multiple postponements of the Bitcoin spot ETF decisions by the U.S. Securities and Exchange Commission, as well as concerns about exchanges’ exposure to terrorist organizations.
The negative sentiment toward cryptocurrencies seems to outweigh any benefits arising from macroeconomic uncertainty and Bitcoin’s predictable monetary policy. From a derivatives perspective, the likelihood of Bitcoin’s price breaking above $28,000 in the short term appears slim.
It is important to note that this article is for general information purposes and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect the views of Cointelegraph.
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