Crypto enthusiasts have inhabited a world where the heat of volatility hike has thawed; the routine 10% stock swings in a couple of days became rarer occurrences. However, an unexpected downturn coating an 11.4% correction from BTC $29,340 to $25,980 between August 15 and August 18, led to massive asset liquidation. Observers begin to question the significance of this correction concerning the market structure, with some attributing this sudden jolt to a drop in liquidity.
Contrary, according to Kaiko Data chart, the 2% Bitcoin order book depth decline has sympathized the volatility decrease, suggesting that market-makers most likely adjusted their algorithms to intercept prevailing market conditions. Thus, it is likely a derivate market assessment of this drop’s impact is needed to determined whether whales and market makers now behave bearish or demand higher premiums for protective hedge positions.
Two independently similar occurrences were identified; a downward shift from March 8 to March 10, which resulted in Bitcoin decreasing by 11.4% to $19,600, the lowest in 7 weeks. This followed the liquidation of Silvergate Bank, a significant operational player in multiple crypto firms. Another substantial movement was witnessed between April 19 and April 21, causing Bitcoin’s value to revisit $27,250 level, following words aired byGary Gensler, Chief of the U.S. Securities and Exchange Commission (SEC). This left little assurance and consistently diminished regulatory efforts.
Bitcoin quarters’ futures usually trade at a slightly higher premium than spot markets. This reflects the seller’s willingness to remain compensated in return for settlement delay. Healthy markets typically show BTC futures contracts trading with an annualized premium ranging from 5% to 10%. This is not limited to the crypto sphere.
The recent crypto market plunge reveals a stark difference from previous instances. Bitcoin’s futures premium started at a higher point, exceeding the 5% neutral threshold, but the shock in the derivative market was absorbed rapidly. The BTC futures rates returned to a 6% neutral-to-bullish position. This indicates that the descent to $26,000 didn’t dampen the optimism in the cryptocurrency, as displayed by whales and market makers. Both Bitcoin options and futures metrics exhibit no signs of professional traders adopting a bearish stance. While doesn’t mean an immediate return of BTC to the $29,000 support level, it decisively lessens the likelihood of a prolonged price correction.
Source: Cointelegraph
