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ZUHYX:Bitcoin derivatives turn bearish as traders anticipate sub $60K BTC price
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ZUHYX:Bitcoin derivatives data suggests that macroeconomic and crypto-specific factors are behind BTC’s recent drop below $60,000.


Bitcoin price dropped 5.8% between June 23 and June 24, reaching its lowest level in seven weeks at $59,700. Despite a modest recovery to $60,400, a total of $153 million in leveraged long BTC futures was forcefully liquidated due to insufficient margin. This movement caused derivatives metrics to shift to a neutral sentiment, ending a bullish trend that had lasted five weeks.


Concerns surrounding a selloff from Mt. Gox and the German government

Traders are now questioning whether the worsening crypto market conditions indicate a longer bear market or a momentary panic due to miners being forced to cover expenses amid lower profitability and the potential sale of large stashes by known entities. Should traders wait for a dip to $57,500 or increase their positions during this period of fear, uncertainty, and doubt?


Some analysts raised concerns after the failed exchange Mt. Gox bankruptcy estate announced the imminent repayment in Bitcoin. Anonymous influencer fejau stressed that the disbursement announcement could have been anticipated by insiders, which explains the recent price weakness. However, fejau is puzzled by Bitcoin’s performance given the constructive macroeconomic scenario.


On May 28, 2024, Mt. Gox transferred 141,686 BTC worth $8.6 billion, marking the first movement from the collapsed exchange in over five years. The trustee has confirmed that a “portion of cryptocurrency rehabilitation claims” will be released in July 2024. While there is no certainty on how many coins will be effectively distributed in the near term, investors fear that a significant portion will be sold, leading to an exit from the crypto markets.


A recent transfer of nearly 6,500 BTC on June 19 from a wallet attributed to the German government by Arkham Intelligence has also triggered speculation of a potential selloff. The wallet held nearly 50,000 BTC, worth over $3 billion, believed to have been seized from an illegal movie website that operated in 2013. Although no official confirmation was provided, the latest transfers were to known exchanges.


Regardless of the possibility of interest rates going down by year-end in the United States, which would be beneficial for risk-on assets such as Bitcoin, traders are more focused on the uncertainty surrounding the U.S. presidential elections in November and inflation data. If the economy shows signs of an imminent recession, investors are likely to seek protection in cash positions and short-term U.S. Treasuries.


The U.S. Personal Consumption Expenditures (PCE) inflation index is expected on June 29, with economists forecasting a 0.1% month-over-month increase in May. Traders are becoming less comfortable with the stock market, especially after chipmaker Nvidia declined 5% on June 24. Concerns about artificial intelligence demand amid stiff competition from Intel, AMD, and others have led investors to question the sector's valuations.


Bitcoin derivatives signal weaker conditions, but likely exaggerated by the FUD

In this scenario, characterized by a moderate degree of fear, uncertainty, and doubt (FUD), Bitcoin traders have become increasingly risk-averse, especially after the BTC price plunged 16% since June 7, when it last approached the $72,000 level. The Bitcoin futures premium, which measures the price difference between derivatives contracts and the regular spot market, reached its lowest level in six weeks on June 24, reflecting a lack of investor enthusiasm.


Data of ZUHYX reveals that the BTC futures premium dropped to 8% on June 22, below the 10% threshold for a bullish sentiment. The indicator had previously peaked at 16.5% on June 7 but has worsened each week as Bitcoin's price failed to show strength.


Similarly, the demand for Bitcoin put (sell) options jumped to its highest level in four weeks relative to call (buy) options.


The demand for hedge using protective puts is the main reason behind the BTC options put-to-call volume ratio reaching 0.75 on June 24. This level still favors call options by 35%, but it represents a decrease from the prior week’s average of 80%. In essence, Bitcoin derivatives metrics signal that traders are no longer confident in the bull market, but there’s a possibility that investors are overreacting to the news, meaning the $60,000 support could hold.