Bitcoin Derivatives Data Points to Traders' $50K BTC Price Target

Bitcoin price struggles to break through resistance

Bitcoin (BTC) price continues to trade below its 2023 high, a sign that investors may have underestimated the strength of the $44,000 resistance. Even as BTC price trades below $42,000, it doesn't necessarily mean that reaching $50,000 and beyond is no longer possible. In fact, quite the opposite seems more likely to occur.

Traders remain optimistic despite recent drop

Looking at Bitcoin derivatives metrics, it is clear that traders ignored the 6.9% drop and remained optimistic. However, is this optimism enough to justify further gains?

Derivatives played a role in the crash

On one hand, one could argue that derivatives markets played a crucial role in the recent negative price movement. However, this analysis overlooks the fact that after hitting a low of $40,200 on Dec. 11, Bitcoin's price increased by 4.2% in the following six trading hours. In essence, the impact of forceful liquidation orders had dissipated long ago, disproving the notion of a crash solely driven by futures markets.

Bitcoin futures premium remains stable

To determine if Bitcoin whales and market makers are still bullish, traders should examine Bitcoin futures premium, also known as the basis rate. Data reveals that the BTC futures premium barely fluctuated despite the 9% intraday price drop on Dec. 11, as it remained above the 10% neutral-to-bullish threshold throughout.

Options markets show balanced cost for both call and put options

Traders should also analyze options markets to gauge whether the recent correction has dampened investor optimism. The BTC options skew has been neutral since Dec. 5, indicating a balanced cost for both call (buy) and put (sell) options. It's not as optimistic as the prior couple of weeks when put options traded at a 10% discount, but it at least shows resilience after the 6.1% correction since Dec. 10.

Retail traders' leverage use has not influenced price action

After covering two of the most relevant indicators for institutional flow, one should analyze whether retail traders using leverage influenced the price action. Data reveals a modest increase in leverage among long positions, but it is not significant enough to drive the rally and subsequent liquidations.

Spot market drives price action

Whatever caused the rally to $44,700 and its subsequent correction to the current $41,300 appears to be primarily driven by the spot market. This doesn't necessarily mean that the bottom is in, but it significantly reduces the odds of cascading liquidations due to excessive optimism tied to the expectation of a spot exchange-traded fund (ETF) approval.

Derivatives indicate positive momentum for Bitcoin

In essence, this is good news for Bitcoin bulls, as derivatives indicate that positive momentum hasn't faded despite the price correction.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.