Many experts are indicating that Bitcoin has hit its alarming bottom of $32,930 after struggling for 6 harsh months. There are always some price predictions involved when dips hit the market and, many of them are mostly wrong. There are were man predictions stating that Bitcoin will never reach a high point after experiencing a low but came back to high prices only after a couple of months.
But one thing is always visible, Bitcoin’s alarming volatility with a ratio of 55% should be taken seriously by all the people involved within the decentralized sphere. The reason to take it seriously is that it has a huge impact on other altcoins during capitulation phases.
One of the recent examples of the said impact is Three Arrows. The capital acquired $676.4 million worth of Ether amid a prominent fall in prices of over 20% in just 48 hours. The capital’s owner Zhu intended to buy Ether at such panic prices. He was content with buying panic dumps like these.
This digital market works under very crucial positions that often are taken by pro traders. To understand if the market still holds a nerve for a bearish move. First, we need to understand the current market conditions through its available data.
The Condition of Future Traders
To precisely measure the condition of the market, the basic measures are taken between longer-term futures contracts and current market levels. For a regular healthy market condition, a 5% to 15% annualized premium is expected. This specific price gap happens due to extreme demand by sellers. Sellers demand more money to hold a certain settlement for a longer period.
After this, the Market also faces backwardation or a red alert condition, which usually happens whenever the demands are turned down or turned negative.
In this phase pro traders often enter a bearish position and flipped the demands of the market to zero or even negative. This generates a lack of demand for short positions during corrective phases, resulting in long-term contracts.
The Threat of “ Fear Zone”
If we observe the market, traders should analyze options in the market. In such panic hours, the market often depends upon the buy and sell calls. The higher the fear of a dip, the lower the demands. Similarly, it goes the other way around too the lower the fear, the higher the demands are.
The metric contrasting with the digital market, the 25% delta skew turns positive when fear is prevalent among the traders related to what happens next or what price will it hit now?. This also shows premium risk call options among the traders. This also goes the opposite when greed is more prevalent than fear. So, turning the 25% delta skew indicator to shift to the negative area.
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In recent months, The 25% skew indicator turned more to the “fear” area, moving above 10%. Then the market saw a 17% peak level in early July 2021. At that time, Bitcoin was touching the $34,000 mark. This can be a bearish indicator of the market due to what the market was overcharging for downside protection overall.
The measurements can be taken as backward-looking and predict market bottoms. This is because, after two weeks of the skew indicator’s 17% peak mark, Bitcoin price went down to $29,300.
Correlation with Traditional markets is Irrelevant
BTC has been in a market slump for quite a few months and has been experiencing a downtrend. This is because the digital world witnessed a sudden tightening of the Federal Reserve’s discourse on cryptocurrencies.
On top of this, the sudden and increased correlation with traditional markets does not answer S&P 500 index, its rise, and all of it happened when Bitcoin was down to 33% from the $69,000. By now this obvious that there is a lack of bearish positions and moves for BTC when it is below $40,000.
On the other hand, we see traders capitulating, amid the liquidation totalled $2.35 billion, which reduced the buyers’ leverage. But due to the volatility and unpredictability of the crypto market, we cannot say that the recent $32,930 was the final bottom. However, one thing is obvious and that is short-term sellers will wait for a bounce in the prices. So, before risking to enter a more bold and bearish position.