摘要： Conflicting Bitcoin derivatives data shows leverage traders bullish, while pro traders fear a deeper correction below $29,000.
This week the stock markets began to flash a little green, and Bitcoin (BTC) is decoupling from traditional markets — but not in a good way. The cryptocurrency is down 3%, while the Nasdaq Composite tech-heavy stock market index is up 3.1%.
May 27 data from the United States Commerce Department shows that the personal savings rate fell to 4.4% in April to reach the lowest level since 2008, Meanwhile, crypto traders are worried that worsening global macroeconomic conditions could add to investors’ aversion to risky assets.
For example, Invesco QQQ Trust, a $160 billion tech company-based U.S. exchange-traded fund (ETF), is down 23% year-to-date. Meanwhile, the iShares MSCI China ETF, a $6.1 billion tracker of the Chinese shares, has declined 20% in 2022.
To get a clearer picture of how crypto traders are positioned, traders should analyze Bitcoin derivatives metrics.
Margin traders are becoming more bullish
Margin trading allows investors to borrow cryptocurrency and leverage their trading position to potentially increase returns. For example, one can buy cryptocurrencies by borrowing Tether (USDT) to enlarge exposure.
Bitcoin borrowers can only short the cryptocurrency if they bet on its price decline, and unlike futures contracts, the balance between margin longs and shorts isn‘t always matched.
The above chart shows that traders have been borrowing more USD and Tether recently, because the ratio increased from 13 on May 25 to the current 20. The higher the indicator, the more confident professional traders are with Bitcoin’s price.
It is worth noting that the 29 margin lending ratio reached on May 18 was the highest level in more than six months and it reflected bullish sentiment. On the other hand, a USDT/BTC margin lending ratio below 5 usually is a bearish sign.
Options markets entered “extreme fear”
To exclude externalities specific to the margin markets, traders should also analyze the Bitcoin options pricing. The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.
The opposite holds when greed is prevalent, causing the 25% delta skew indicator to shift to the negative area. In short, if traders fear a Bitcoin price crash, the skew indicator will move above 8%. On the other hand, generalized excitement reflects a negative 8% skew.
The 25% skew indicator has been above 16% since May 11, indicating an extremely unbalanced situation because market markets and professional traders are unwilling to take downside pricing risks.
More importantly, the recent 25.6% peak on May 14 was the highest ever 25% skew in Bitcoin’s history. Currently, there is a strong sense of bearishness in BTC options markets.
Explaining the duality between margin and options
A potential explanation for the divergent mindset between BTC margin traders and option pricing could have been the Terra USD (UST) collapse on May 10. Market makers and arbitrage desks might have taken heavy losses as the stablecoin lost its peg, consequently reducing their risk appetite for BTC options.
Moreover, the cost of borrowing USD Tether has dropped to 3% per year on Aave and Compound, according to Loanscan.io. This means that traders will take advantage of this low-cost leverage strategy, thereby increasing the USDT/BTC margin lending ratio.
There is no way to predict what would cause Bitcoin to end the current bearish trend, so access to cheap financing does not guarantee a positive price action.