Despite last week’s 11.4% fall, pro traders’ sentiment was unaffected, according to BTC futures and options data.
In the past few months, Bitcoin traders had grown used to less volatility, but historically, it’s not uncommon for the cryptocurrency to see price swings of 10% in just 2 or 3 days. The recent 11.4% correction from $29,340 to $25,980 between August 15 and August 18, took many by surprise and led to the largest liquidation since the FTX collapse in November 2022. But the question remains: was this correction significant in terms of the market structure?
Certain experts point to reduced liquidity as the reason for the recent spikes in volatility, but is this truly the case?
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish image 145](https://i0.wp.com/nosisnews.com/wp-content/uploads/2023/08/image-145.png?resize=1024%2C557&ssl=1)
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish image 145](https://i0.wp.com/nosisnews.com/wp-content/uploads/2023/08/image-145.png?resize=1024%2C557&ssl=1)
As indicated by the Kaiko Data chart, the decline of 2% in the Bitcoin order book depth has mirrored the decrease in volatility. It’s possible that market makers adjusted their algorithms to align with the prevailing market conditions.
Hence, delving into the derivatives market to assess the impact of the drop to $26,000 seems reasonable. This examination aims to determine whether whales and market makers have become bearish or if they’re demanding higher premiums for protective hedge positions.
To begin, traders should identify similar instances in the recent past, and two events stand out:
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 5fba3a88 3da3 4021 af5f d3b58057cc82](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/5fba3a88-3da3-4021-af5f-d3b58057cc82.png?ssl=1)
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 5fba3a88 3da3 4021 af5f d3b58057cc82](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/5fba3a88-3da3-4021-af5f-d3b58057cc82.png?ssl=1)
The first decline took place from March 8th to March 10th, causing Bitcoin to plummet by 11.4% to $19,600, marking its lowest point in over 7 weeks. This correction followed the liquidation of Silvergate Bank, a crucial operational partner for multiple cryptocurrency firms.
Related: Is Bitcoin Heading to $20K? Bears Eye Key Support Level
The subsequent significant movement occurred between April 19th and April 21st, resulting in a 10.4% drop in Bitcoin’s price. It revisited the $27,250 level for the first time in more than 3 weeks after Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), addressed the House Financial Services Committee. Gensler’s statements provided little reassurance that the agency’s enforcement-driven regulatory efforts would cease.
Not every 10% Bitcoin price crash is the same
Bitcoin quarterly futures generally tend to trade with a slight premium when compared to spot markets. This reflects sellers’ inclination to receive additional compensation in return for delaying the settlement. Healthy markets usually display BTC futures contracts being traded with an annualized premium ranging from 5% to 10%. This situation, termed “contango,” is not unique to the cryptocurrency domain.
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish bb5fe907 36f9 45e2 b1f0 1e9ecb71739c](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/bb5fe907-36f9-45e2-b1f0-1e9ecb71739c.png?resize=719%2C354&ssl=1)
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish bb5fe907 36f9 45e2 b1f0 1e9ecb71739c](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/bb5fe907-36f9-45e2-b1f0-1e9ecb71739c.png?resize=719%2C354&ssl=1)
Leading up to the crash on March 8, Bitcoin’s futures premium was at 3.5%, indicating a moderate level of comfort. However, when Bitcoin’s price dipped below $20,000, there was an intensified sense of pessimism, causing the indicator to shift to a discount of 3.5%. This phenomenon, referred to as “backwardation,” is typical of bearish market conditions.
Conversely, the correction on April 19 had minimal impact on Bitcoin’s futures main metric, with the premium remaining around 3.5% as the BTC price revisited $27,250. This could imply that professional traders were either highly confident in the soundness of the market structure or were well-prepared for the 10.4% correction.
A comparison with the most recent event, the 11.4% BTC crash between August 15 and August 18, reveals distinct dissimilarities from previous instances. The starting point for Bitcoin’s futures premium was higher, surpassing the 5% neutral threshold.
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 5ea790c6 7b5a 42a0 abdd e6e581b217b2](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/5ea790c6-7b5a-42a0-abdd-e6e581b217b2.png?ssl=1)
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 5ea790c6 7b5a 42a0 abdd e6e581b217b2](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/5ea790c6-7b5a-42a0-abdd-e6e581b217b2.png?ssl=1)
Notice how rapidly the derivatives market absorbed the shock on August 18. The BTC futures premium swiftly returned to a 6% neutral-to-bullish position. This suggests that the decline to $26,000 did not significantly dampen the optimism of whales and market makers regarding the cryptocurrency.
Options markets confirm lack of bearish momentum
Traders should also analyze options markets to understand whether the recent correction has caused pro traders to become more risk-averse. In short, if traders anticipate a Bitcoin price drop, the delta skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 3b87e8ac b81c 4c39 8b60 c249b553236b](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/3b87e8ac-b81c-4c39-8b60-c249b553236b.png?ssl=1)
![Bitcoin Price Stabilizes at $26K as Pro Traders Remain Bullish 3b87e8ac b81c 4c39 8b60 c249b553236b](https://i0.wp.com/s3.cointelegraph.com/uploads/2023-08/3b87e8ac-b81c-4c39-8b60-c249b553236b.png?ssl=1)
Data indicate excessive demand for call (buy) BTC options ahead of the August 15 crash, with the indicator at -11%. This trend changed over the subsequent five days, though the metric remained within the neutral range and was unable to breach the 7% threshold.
Ultimately, both Bitcoin options and futures metrics reveal no signs of professional traders adopting a bearish stance. While this doesn’t necessarily guarantee a swift return of BTC to the $29,000 support level, it does reduce the likelihood of an extended price correction.
Related: Bitcoin, Ether Slump Send Crypto Market into Free Fall