The price of Bitcoin (BTC) dropped 5.5% from Sept. 3 to Sept. 5, reaching a low of $55,860. This decline from $59,090 led to a modest $58 million in liquidated leveraged long futures, suggesting that bulls were not caught off guard. Despite this price weakness, Bitcoin derivatives signal resilience, indicating that traders are neither using excessive leverage nor displaying overconfidence.
Is the Bitcoin bull market over?
Some analysts argue that Bitcoin’s 2024 bull run has officially ended, citing the $73,757 all-time high that occurred almost six months ago. On the other hand, some traders view the 30% pullback during this period as typical market behavior.
Regardless of market sentiment, historical BTC price rallies following previous halving cycles typically took five to six months to materialize. Additionally, uncertainty surrounding the upcoming US presidential election and shifts in US central bank monetary policy add to the current market volatility.
Source: Armando Pantoja
Crypto and blockchain tech educator Armando Pantoja notes that Bitcoin tends to start rallying around 10 months after an increase in the monetary supply. In this instance, the US M2 began expanding in February 2024, suggesting that the added liquidity could influence Bitcoin’s price by December if past trends hold true.
However, regardless of whether historical patterns repeat, Bitcoin traders appear less reactive to price corrections, as indicated by derivatives metrics. For example, before the Aug. 5 crash, traders were overly optimistic about Bitcoin’s price based on futures market data. As a result, the subsequent drop below $55,000 led to a chain of liquidations down to $50,000.
Bitcoin 2-month futures annualized premium. Source: Laevitas.ch
Currently, the Bitcoin futures premium is at 6%, approaching the lower boundary of the neutral range, which spans from 5% to 10%. During periods of heightened excitement, the excessive demand for leveraged longs can push these monthly contracts to trade at a premium of 10% or higher compared to regular BTC spot markets. More importantly, the indicator has remained unchanged from the previous week, indicating that demand for bearish bets (shorts) has stayed flat.
To determine whether this sentiment is confined to the futures market, it's essential to analyze Bitcoin options as well. The 25% delta skew measures the difference between call (buy) and put (sell) option premiums. A skew above 7% signals excessive downside risk, while values between -7% and +7% are considered neutral.
Bitcoin 1-month options delta skew at Deribit, put-call. Source: Laevitas.ch
The Bitcoin options delta skew has remained neutral at 3% over the past seven days, showing resilience despite the 6% decline in BTC’s price during this period. This indicator tends to rise when whales and market makers anticipate a sharp price correction, so the data aligns with the neutral tone seen in Bitcoin futures markets.
US job market data will be decisive to Bitcoin’s near-term performance
The ADP National Employment Report, released on Sept. 5, added to the downward pressure on Bitcoin’s price. The report showed 99,000 jobs were added in August, falling short of economists’ expectations and lower than the 122,000 jobs added in July. A weak job market could pose a challenge to the US Federal Reserve's "soft landing" strategy, which aims to lower interest rates without causing a recession.
Related: Bitcoin price eyes 'relief rally' to $61K after downside liquidation wipeout
Bitcoin investors may be cautious about adding new positions ahead of the Sept. 10 US payroll data. According to Yahoo Finance, "another weak jobs report could add to market concerns, spurring more selling pressure." A potential flight-to-quality scenario often benefits gold and short-term government bonds, creating additional pressure on Bitcoin’s price.
At present, there are no clear signs that Bitcoin traders are turning bearish, despite the $804 million in outflows from spot Bitcoin exchange-traded funds (ETFs) over the past six trading days. As a result, the resilience in BTC derivatives suggests traders are comfortable with the current $56,000 level, while also indicating that bears are hesitant to bet on further price declines.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.