Bitcoin price is hovering at $ 40,000, but data on derivatives continues to rise

Bitcoin (BTC) price has been facing a period of intense volatility since it moved from a high of $ 52,950 on September 7 to a low of $ 42,800 just two hours later. More recently, the $ 45,000 support lasted for several days despite being heavily tested, which triggered the $ 3,400 rally and fall on September 13th.

There’s no doubt that shorts – traders looking to decline – have had the upper hand since the liquidation of $ 3.54 billion worth of long futures (buyers) on July 7th.

MicroStrategy’s September 13 announcement that it had added more than 5,050 bitcoins at an average price of $ 48,099 was not enough to restore confidence, and the price of the cryptocurrency remained unchanged at $ 44,200.

While the effects of short selling are being felt, regulatory concerns are more likely to continue to hold back markets as the U.S. Treasury Department has reportedly discussed possible regulation for private stablecoins, Reuters reported on Sept. 10.

The growing interest from regulators can be attributed to the stablecoin’s market cap increasing from $ 37 billion in January to $ 125 billion today. Additionally, both Visa and Mastercard have reiterated their interest in stablecoin-related solutions.

Regardless of the reasons for the current price weakness, derivative contracts have been showing bullish sentiment since August.

Professional traders have been bullish for the past five weeks

Quarterly Bitcoin futures contracts are the preferred tool of whales and arbitrage tables because they have the significant advantage of not having fluctuating funding rates. However, these can appear complicated to retailers due to their billing dates and price differences compared to the spot market.

When traders opt for open-ended contracts (reverse swaps), the derivatives exchanges charge a fee every eight hours, depending on which side is using more leverage. Meanwhile, contracts that expire on a fixed date are usually traded at a premium from regular spot exchanges to make up for late payments.

In healthy markets, an annual premium of 5 to 15% is expected as the funds tied up in these contracts can be used for lending opportunities. This situation is known as contango and occurs with almost every derivative.

However, this indicator fades or turns negative during bear markets, causing a red sign known as a “rewind”.

The graph above shows that the premium (base rate) rose over 8% on August 7th and has maintained this moderately bullish trend ever since. As a result, the data is exceptionally healthy and shows little indecision, even though Bitcoin has tested below $ 44,000 twice in the past 15 days.

Related: Regulatory and privacy concerns are tracking the SEC threat to Coinbase

Open futures are still good

The liquidation of 3.54 billion

See how the current $ 14.8 billion value is 23% higher than the June and July average of $ 12 billion. This contradicts speculation that traders have been hard hit due to Bitcoin’s volatility and are reluctant to take positions or fear an imminent bearish event for whatever reason.

There is no doubt, at least according to the futures market, that investors are neutral on the upside despite the recent price correction. Of course, traders should keep an eye on key resistance levels, but $ 44,000 has held up so far.