Despite the rejection of the Bitcoin price at the $24,200 resistance area on August 10, the price is still in a bullish channel and is expected to reach the $29,000 mark by October. This bullish formation is due to the support at the $22,500 level.
Data from the Bitcoin derivatives market shows a lack of interest from long-term investors. However, it does not imply that the price is poised for a surprise crash.
On August 8, chip and video graphics card manufacturer NVDA reported a 19 percent drop in its second-quarter sales. Also, the U.S. Senate passed a bill that could have a negative impact on corporate earnings. Despite the $430 billion that the Senate was able to release for the climate, healthcare, and tax reforms, the provision that would impose a one percent tax on stock buybacks remains.
The high correlation between traditional assets and cryptocurrencies is a concern for investors. Although the Fed is expected to reduce its monetary stimulus programs once the inflation pressure recedes, investors should still be cautious due to the central bank closely monitoring employment data. The latest reading showed that the unemployment rate remained at 3.5 percent, a typical level of overly heated markets.
Investors should still reduce their risk positions until the Fed starts to ease its monetary policies. This is the reason why crypto traders are closely following the macroeconomic data.
Although Bitcoin cannot break the resistance at the $24,200 level, investors should still consider looking at the derivatives market to see how professional investors are reacting to the recent developments.
Macro/Crypto:— Raoul Pal (@RaoulGMI) August 10, 2022
Markets now have a pretty clear run until regional Fed surveys in a weeks or so. I expect those to be significantly weaker. Peak inflation gives way to peak growth fear. I do think markets will react positively to weak growth, not negatively, broadly speaking.
Derivatives show neutral-to-bearish signs
The annualized premium measures the difference between the current market price and the long-term futures contracts. It indicates that traders should lock in their money until the contract's expiration. The indicator should trade between 4 to 8 percent to provide a cushion for "locking in." On the other hand, levels below 2 percent are considered extremely bearish.
The annualized premium fell below 4 percent on June 1, mainly due to the lack of demand for long positions. However, the 2 percent level is not considered alarming, given that Bitcoin is currently down 51 percent from its highs.
Aside from the daily price action, Bitcoin options also have a significant delta indicator. This signals that market participants are overcharging for protection against the possible downside or upside risks.
The implied volatility of Bitcoin options is also influenced by the fear of a price crash. If the number of traders expecting a price crash exceeds 12 percent, the skew indicator will increase.
Since August 5, the skew indicator has fluctuated between 3 and 5 percent. Although options traders might not be overly excited by the current market price, they have stopped overcharging for protection. This suggests they are starting to abandon the negative sentiment seen in the previous few months.
Despite the lack of buying interest, Bitcoin's current ascending channel pattern implies a short-term bullish trend and reassurance for investors. It shows that the path to a $29,000 price is still intact if the employment and inflation statistics continue to improve.
Since the price of Bitcoin is rising, a daily close above the $24,200 resistance level could invalidate the asset's negative sentiment. A break above this level could trigger a potential spike in the price.