Bitcoin Derivatives Indicate Range-Bound Price for BTC

Bulls Find Hope After Recent Rally

Bitcoin (BTC) saw a 5% increase after testing the $25,000 support level on Sept. 11. However, this rally does not necessarily mean a win for the bulls. BTC has actually experienced a 15% decline since July, while the S&P 500 index and gold have remained stable. Despite major catalysts like Microstrategy's plan to acquire more BTC and requests for Bitcoin spot ETFs, Bitcoin has struggled to gain momentum. Yet, Bitcoin derivatives suggest that bulls believe $25,000 marked a bottom and could lead to further gains.

Factors Working in Bulls' Favor

Bitcoin's primary drivers for 2024, such as the prospects of a spot ETF and the reduction in supply from the April 2024 halving, are still in play. Additionally, certain immediate risks in the cryptocurrency market have diminished. The U.S. Securities and Exchange Commission (SEC) suffered partial losses in legal cases involving Grayscale, Ripple, and Uniswap, reducing potential market volatility.

Bears Have Their Advantages

Bears also have their set of advantages. Ongoing legal cases against major exchanges like Binance and Coinbase pose a challenge. The Digital Currency Group (DCG) is facing financial trouble after one of its subsidiaries declared bankruptcy, leading to a potential sale of Grayscale-managed funds, including the Grayscale Bitcoin Trust (GBTC). This situation gives bears an edge in the market.

Derivatives Metrics Provide Insight

Examining derivatives metrics can help understand how professional traders are positioned in the market. Despite the recent correction, Bitcoin futures and options metrics have remained stable. Typically, BTC futures trade at a slight premium to the spot market, but the futures premium has been below the neutral threshold. This indicates a lack of demand for leverage long positions. Looking at options markets, the 25% delta skew metric shows that investors have become more optimistic after the retest of $25,000, indicating balanced pricing between call and put options.

Uncertainty Favors Bears, But Bulls Stay Confident

Given the uncertainty in the macroeconomic landscape, traders may prefer a "return to the mean" approach, sticking to the trading range of $25,500 to $26,200. However, the fact that derivatives markets held up during the recent dip below $25,000 is a positive sign for bulls. Both bulls and bears have triggers that could impact Bitcoin's price, but timing these events is challenging. As a result, derivatives metrics have remained resilient as caution is exercised on both sides to avoid excessive exposure.

Note: This article is for general information purposes and should not be considered legal or investment advice. The views expressed here are the author's alone and do not necessarily reflect the views of Cointelegraph.