Bitcoin (BTC) has risen as the start of October, when the year’s highest month has historically approached. Ether (ETH) has now turned green for the past 24 hours, with 18 other members of the Coindesk 20 index also earning 3.0%.
Still, there is a reason to be wary. In the derivatives market, futures are showing a shift from a bullish stance while options send mixed messages.
Funds trading on the exchange are leaking, with both spot Bitcoin ETFs and ether ETFs of US notching net leaks on Friday. In the case of ETH ETF, it is the fifth consecutive day of withdrawal on the fifth day, and it is the longest winning streak since September 8th.
Another warning sign is the CME futures gap. This is the difference in Bitcoin prices when the CME futures market closes on Friday and when it reopens on Sunday. This is below the current level. The gaps in futures tend to be filled.
Positioning of derivatives
Jacob Joseph
- Overall open interest on BTC futures has fallen from the recent $320 billion to around $29 billion, indicating traders are reducing exposure.
- At the same time, the profitability of trade is reduced as the annual base for three months remains compressed at around 6%.
- Essentially, the market shows a clear shift from bullish bias as traders unleash their strengths and more and more shorts enter the market.
- In the options, the volatility term structure implied BTC shows an upward slop curve, with an increase in 25 delta distortion short-term options (one week, one month), suggesting that some traders are paying a more call premium than put.
- This is directly inconsistent with the 24-hour put call volume. This indicates that it is dominant at 58.43% of contracts traded.
- The divergence suggests a highly polarized market that has been betting on short-term gatherings, while also actively hedging against declines, leading to states of indecision and mixed-emotion.
- BTC’s funding rate has recently become negative, suggesting a growing bearish sentiment. After stabilizing most of the week, the annual funding rate for high lipids fell sharply to minus-6%. This shows strong beliefs from traders who are shortening BTC on that platform.
- Meanwhile, funding rates at major venues such as Binance and OKX remain close to neutral. The overall trend, particularly the sudden drop in high lipids, suggests that traders are actively robbing and positioning risks from the table due to lower BTC prices.
- Coinglass data shows a $350 million liquidation in a 24-hour liquidation, with 24-76 long and shorts split. ETH ($130 million), BTC ($52 million) and Sol ($37 million) were leaders in terms of conceptual liquidation. Binance’s liquidation heatmap shows $113,000 as the core liquidation level to monitor in the event of price increases.
Token talk
Oliver Night
- XPL, Plasma’s native token, is beginning to cool off following its red-hot trading debut. Tethered back tokens have been changing hands at $1.29, down 12% over the past 24 hours, as daily trading volumes fell 9% to $2.3 billion.
- However, on-chain activity talks about something else, with deposits increasing 13.7% to $5.5 billion over the same time. Much of that capital flows into yield generation products, such as plasma saving vaults.
- According to Defilama data, the combination of attractive yields and rapid influx has prompted Plasma to climb blockchain rankings quickly, already overtaking Coinbase support base in terms of locked totals.
- Although XPL’s trading activity is chilled, the influx suggests strong investors’ appetites in the relative lull of the broader crypto market as assets such as BTC and ETH returned to their respective levels of support at the tail end last week.
- It remains to be seen how well plasma and its protocols will work during the bullish market phase, but blockchain focused on Stablecoin has already acquired fruit when the market is under pressure.