Data shows that derivatives have little to do with Bitcoin’s decline to $ 29,000 on June 24, 2021

After a brief rebound to $ 41,000 on June 14, Bitcoin (BTC) investors might think the bear market is finally over. After all, this is the highest level since May 21, the day MicroStrategy (MSTR) announced a successful $ 500 million bond offer.

Funds are typically available within a business day or two and the proceeds are used to generate even more bitcoins for the business intelligence company’s bottom line. MicroStrategy followed up on that funding round with another surprise proposal to sell up to $ 1 billion of its shares in order to buy more Bitcoin.

However, the following week saw a 30% decline, bringing Bitcoin to its lowest level since January 22nd. The $ 28,800 low may take less than fifteen minutes, but bear sentiment is already well established.

The sell-off was largely attributed to investments by Chinese miners after they were forced to abruptly shut down. In addition, on June 21, an official from the People’s Bank of China (PBoC) reiterated that all banks and payment institutions “cannot provide account opening or registration services.” [virtual currency]-Related activities. “

The open question is whether derivatives play an important role in regulation or at least show signs of stress that could point to an even more dangerous way back?

Future premiums show no signs of decline

The futures (or base) premium measures the distance between a longer-term futures contract and the current spot level (the regular market). Whenever this indicator fades or goes negative, it is an alarming red flag. This situation is also known as a pullback and indicates a bearish sentiment.

Futures contracts should be traded in healthy markets, also known as contango, at an annual premium of 5% to 15%. Worst of all, on June 22nd, the base bottomed at 2.5%, which was considered bearish but was insufficient to trigger red flags.

Don’t panic from top traders

The top traders ‘long to short indicators are calculated using clients’ consolidated positions, including spot, margin, perpetual and futures contracts. This metric captures a broader view of the effective net positions of professional traders.

Despite the differences between the methods of exchanging cryptocurrencies, analyzing changes over time provides valuable insights. For example, top traders at Binance increased their long positions versus short trades on June 22nd.

Huobi’s net short-term exposure has increased, but it is not uncommon for the indicator to hit the same level two days earlier.

Eventually, the top OKEx traders reduced their purchases on June 20 and have since held the 0.80 level in favor of the 20% shorts.

Liquidation of long-term contracts under $ 600 million

Those unaware of the price movements would never have suspected that Bitcoin is trading below $ 29,000 based on the liquidation data from futures.

On June 22, less than $ 600 million long-term liquidated, less than the previous day’s $ 750 million. If it’s long oversold, a 20% drop in less than two days will trigger stop orders of much larger size.

The data shows no current signs of long-term magnetic stress or potentially negative volatility from the futures market.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.