Bitcoin price data shows investor sentiment at 3-month low

Bitcoin (BTC) has suffered a 4.9% correction in four days after failing to break through $28,000 resistance on October 8, and derivatives gauges show that fear is ruling sentiment in the market – but will Bitcoin's price be enough to shake off its current position? Range?

Looking at the bigger picture, Bitcoin is holding up remarkably well, especially compared to gold, which has fallen 5% since June, and Treasury Inflation Rate (TP) bonds, which have fallen 4.2% over the same period. Bitcoin has outperformed two of the safest assets in traditional finance, maintaining its position at $27,700.

After Bitcoin's price rejection at $28,000 on October 8, investors should analyze the parameters of BTC derivatives to determine whether the bears are actually in control.

Treasury inflation-protected securities are U.S. government bonds designed to protect against inflation. Thus, as bond principal and interest payments rise in line with inflation, increasing the purchasing power of investors, the value of TIP exchange-traded funds (ETFs) increases.

$27,600 Bitcoin is not necessarily a bad thing.

Regardless of this historic achievement, Bitcoin enthusiasts may not be entirely satisfied with its current market capitalization of $520 billion, even though it exceeds the market capitalization of global payment processors Visa ($493 billion) and ExxonMobil ($428 billion). This bullish prospect is based in part on Bitcoin's previous all-time high market cap of $1.3 trillion in November 2021.

It's important to note that the US dollar index, which measures the dollar against a basket of foreign currencies – including the euro, Swiss franc and British pound – is nearing its highest level in 10 months. This suggests strong confidence in the resilience of the US economy, at least relatively. This alone should be enough to reduce interest in alternative hedging instruments such as Bitcoin.

Some might argue that the 3% gain in the S&P 500 index since June is counterintuitive to investors looking for cash positions. However, in addition to being the most profitable, the top 25 companies hold $4.2 trillion in cash and equivalents. This explains why stocks are used as a hedge rather than a hedge against risk.

Basically, there is no reason for Bitcoin investors to be dissatisfied with recent performance. However, this sentiment changes when we examine the parameters of BTC derivatives.

Bitcoin derivatives are showing a decline in bulls' interest

To begin with, the Bitcoin futures contract premium, also known as the base rate, has hit its lowest level in four months. Typically, Bitcoin monthly futures trade at a small premium compared to spot markets, indicating that sellers are asking for more money to extend settlement. As a result, futures contracts in healthy markets should trade at an annual premium of 5% to 10%, a situation not unique to crypto markets.

The current 3.2% futures premium (base rate) before BlackRock's offering for the spot ETF is the lowest since mid-June. This measure indicates a decline in consumer appetite, although it does not necessarily reflect depressed expectations.

The rejection of $28,000 on October 8 has dampened optimism among investors, traders should explore the Bitcoin options market. A delta skew of 25% is indicative, especially when arbitrage desks and market makers are paying protection against background or leverage.

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If traders anticipate a fall in Bitcoin prices, the skew metrics will rise above 7%, and bullish periods will have a -7% skew.

As shown above, Bitcoin options' 25% delta skew turned into “fear” mode on October 10, with defensive put (sell) options currently trading at a 13% premium to call (buy) options.

Bitcoin derivatives metrics suggest traders are losing confidence, which can be attributed in part to US Securities and Exchange Commission rulings on bitcoin ETFs and concerns about exchanges' exposure to terrorist organizations.

For now, negative sentiment toward cryptocurrencies seems to offset any gains from macroeconomic uncertainty and the natural hedge protection provided by Bitcoin's predictable monetary policy. At least from a baseline perspective, the likelihood of Bitcoin price breaking above $28,000 in the short term seems slim.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.