The blockchain space is seeing some strong points despite the perceived market downturn. The perpetual term funding rates for Bitcoin (BTC) and Ether (ETH) turned positive again on major exchanges, showing bullish sentiment among derivatives traders. Additionally, Bitcoin began trading below its base price, marking previous market lows. In contrast, in June, decentralized finance (DeFi) saw a 33% drop in total value locked and crypto stocks provided an average return of -42.7% month-over-month.
There is an ongoing battle between bullish and bearish sentiments in different areas 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 breaks down the most notable market events of the past month and the most critical data across the various industry sectors. The researchers provide expert analysis and insights that can benefit serious players in the blockchain market.
Derivatives can provide a key indicator of shifting sentiment
Prior to June, there had been 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 ranges suggest less volatility, implying greater confidence in the market. On June 18, the 25-delta bias in Bitcoin options peaked at 36%, the highest on record. Since then, some optimism has returned, causing the bias to drop to 17%. This signals a strong belief that the crypto market will rebound over the next few months.
Long call premiums on Bitcoin and Ether indicate traders are optimistic for the end of the year. However, solvency issues and the risk of contagion are still present in the market and on the minds of investors and regulators.
In sideways markets, traders can use chokes to generate returns if Bitcoin remains limited. Chokes involve the writing of 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 at $20,000, first sell a put at $15,000 down and a call at $30,000 up. If they expire after one month, the bonuses result in the winnings less transaction fees.
Currently, the options bias has a steep slope, with an implied volatility differential of up to 10% between strike prices of $17,000 to $24,000 on Deribit and the Chicago Mercantile Exchange. This indicates a good setup for a risk reversal involving a short sell at $17,000 and a long call at $24,000.
Is the bullish sentiment starting to fend off the bears?
Bitcoin’s unrealized net loss hit its lowest level in three years, highlighting that its current market value is nearly 17% lower than its overall cost base. Historically, global lows have formed when losses have reached more than 25%. The descending 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 the price of Bitcoin. The net unrealized profit/loss indicator is further evidence that the bulls could potentially overtake the bears.
From derivatives to the NFT sector
The Investor Insights report covers various other topics such as security tokens, DeFi, blockchain gaming, cryptocurrency mining, blockchain-related stocks, regulation, and venture capital investments. Subject matter experts keep up to date with all the latest news and trends to cut the weeds and provide essential insights into the blockchain industry.
Each section of the report covers important elements having an impact on the subject. Subject matter experts cover the most important events that will have a significant impact, and the information is presented in an digestible format that serious crypto market participants can use to get an overview, highlights, and forecast of this. which may be on the horizon. The newsletter is now available for subscription and offers comprehensive charts and detailed analysis.
The Cointelegraph Research Team
Cointelegraph’s research department includes some of the best talent in the blockchain industry. Combining academic rigor with practical, hard-won experience, the team’s researchers are committed to bringing the most accurate and insightful content available to the market.
Demelza Hays, Ph.D., is a research director at Cointelegraph. Hays has assembled a team of subject matter experts in all areas of finance, economics and technology to bring to market the premier source of in-depth industry reports and analysis. The team uses APIs from a variety of sources to provide accurate and useful insights and analysis.
With decades of combined experience in traditional finance, business, engineering, technology and research, the Crypto Research Team is perfectly positioned to put their combined talents to good use with the Investor Insights report.
Disclaimer: The opinions expressed in the article are provided for informational purposes only and are not intended to provide specific information tips or recommendations for any person or on a specific title or investment product.