Bitcoin derivatives data suggests that a BTC price pump above $18,000 will not be easy

Traders could now be happy that bitcoin price has scaled above $17,400, but twenty-seven long days have passed since bitcoin (BTC) last broke the $17,250 resistance.

On December 13, bitcoin rallied 6.5% towards $18,000 after a two-week range, and while the current move is still lacking strength, traders believe a retest of the $18,250 resistance remains possible.

Bitcoin 12-hour price index, USD. Source: TradingView

To start the week, the S&P 500 index rose to a 26-day high on Jan. 9. Weak economic data had previously fueled investor expectations for slower rate hikes by the US Federal Reserve (Fed) and Jan. 19. 12 Consumer Index Report (CPI) may lend some credibility to this expectation.

On Jan. 6, German retail sales data showed that November saw a 5.9% yoy decline. In the US, economic activity in the service sector contracted in December after 30 consecutive months of growth. The services PMI read 49.6% and readings below 50% usually indicate a slowing economy.

Investors are eagerly awaiting the release of the Consumer Price Index (CPI) on Jan. 12, which is more likely to dictate bets on whether the Fed will hike rates by 0.25% or 0.50% in early February. Economists expect inflation to rise 6.6% yoy in December, so a weaker-than-consensus CPI could further boost market performance.

Still, the impact of a year-long bear market continues to be felt, as digital asset manager Osprey Funds reportedly laid off most of its employees in the second half of 2022. The investment company offers crypto products for the brokerage accounts of its accredited investors, including a pledge.

Analysts should focus on bitcoin derivatives to understand if the recent positive price action has finally turned crypto investor sentiment positive.

The futures premium shows that sentiment is slowly improving

Retailers typically avoid quarterly futures due to their price differential to spot markets. Meanwhile, professional traders prefer these instruments because they prevent fluctuations in funding rates in a perpetual futures contract.

The annualized two-month futures premium should trade between +4% and +8% in healthy markets to cover the costs and the risks involved. So when the futures are trading below such a range, it shows a lack of confidence from leveraged buyers – typically a bearish indicator.

Bitcoin 2 Month Futures Annualized Premium. Source: Laevitas.ch

The chart above shows positive momentum for the bitcoin futures premium, which has recovered from a 3% discount on Dec. 30 to currently positive 1%. While still in the neutral to bearish territory, it represents less pessimism than it did on Dec. 13 before Bitcoin price was pumped to $18,000. However, demand for leveraged longs is timid at $17,000 according to the metric.

Before jumping to conclusions, traders should also analyze Bitcoin’s options markets to rule out externalities specific to the futures instrument.

Cast your vote now!

Options price in similar risks for upside and downside moves

The 25% delta skew is a telling sign that market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors offer higher chances of price dumping, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew indicator below -10%, which means the bearish put options are discounted.

Bitcoin 60-day options 25% delta skew: Source: Laevitas.ch

The delta skew bottomed at 8% on Jan. 9, suggesting that options traders are pricing in similar risks for upside and downside moves. More importantly, the current level is the lowest since November 8, 2022, or since the FTX exchange imploded.

Even if there is no appetite for leveraged longs with bitcoin futures, trading options for whales and market makers are feeling more comfortable as $17,000 turns into support.

While there is no evidence that a move to $18,250 is imminent, derivative data suggests traders are at least less risk averse.

The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers