Bitcoin traded below its mining cost base in June, DeFi saw a 33% drop in TVL, and weekly BTC options hit an all-time high in mid-month.
The blockchain space is seeing some strengths despite the perceived market decline. Perpetual term financing rates for Bitcoin (BTC) and Ether (ETH) turned positive again on major exchanges, showing bullish sentiment among derivatives traders. Additionally, Bitcoin started trading below base price, marking previous market lows. By contrast, decentralized finance (DeFi) saw a 33% drop in total locked-in value in June and crypto stocks delivered an average return of -42.7% month-over-month.
There is an ongoing battle between bullish and bearish sentiments in different parts of the market. To help cryptocurrency traders navigate the battlefield, Cointelegraph Research recently launched its monthly “Investor Insights Report”. In the report, the research team summarizes the most notable market events from the past month and the most critical data across industry sectors. The researchers provide expert analysis and insights that can benefit serious players in the blockchain market.
Derivatives can be an important indicator of shifting sentiment
Before June, there was a strong bearish sentiment in the market. A bearish and bullish sentiment indicator is the volatility bias of a market. The wider the range of asymmetry, the more volatile it is, while narrower range suggests less volatility, implying greater confidence in the market. On June 18, the 25-delta bias in Bitcoin options peaked at 36%, its highest ever. Since then, some optimism has returned, bringing the bias down to 17%. This indicates a strong belief that the cryptocurrency market will recover in the coming months.
Long call premiums on Bitcoin and Ether indicate that traders are optimistic for the end of the year. However, solvency issues and the risk of contagion are still present in the market and in the minds of investors and regulators.
In sideways markets, traders can use chokes to generate returns if Bitcoin remains limited. Chokes involve writing put and call options at different strike prices. The idea of a choke is, as the name suggests: placing a put (a put option) and a call (a call option) below and above the current spot price. For example, if Bitcoin is $20,000, first sell a put $15,000 down and a call $30,000 up. If they expire after a month, the bonuses result in the profit minus transaction costs.
Currently, preference for options is on a steep slope, with an implied volatility difference of up to 10% between strike prices of $17,000 to $24,000 on Deribit and the Chicago Mercantile Exchange. This indicates a good set up for a risk reversal with a $17,000 short sell and a $24,000 long call.
Is bullish sentiment starting to fend off the bears?
Bitcoin’s unrealized net loss hit its lowest level in three years, suggesting that its current market value is nearly 17% lower than its total cost base. Historically, global lows have formed when losses have reached more than 25%. The falling moving averages and the relative strength index in the oversold zone indicate that the bears are under control.
However, for the first time since March 2020, Bitcoin traded below its mining cost base, a level that has historically marked global capitulations and lows in Bitcoin’s price. The net unrealized gain/loss indicator is further evidence that the bulls could potentially overtake the bears.
From derivatives to the NFT sector
The Investor Insights report covers several other topics such as security tokens, DeFi, blockchain gaming, cryptocurrency mining, blockchain-related equities, regulation, and venture capital investments. Subject matter experts stay on top of all the latest news and trends to weed the weeds and provide essential insights into the blockchain industry.
Each section of the report covers key elements that affect the topic. Subject matter experts cover the key events that will have a significant impact, and the information is presented in a digestible format that serious participants in the cryptocurrency market can use to gain insight, highlights and a prediction of this. The newsletter is now available for subscription and offers extensive charts and detailed analysis.