Bitcoin Futures Reflect Traders’ Concerns Over Impending Regulations

Divya  |  Sep 22, 2021

Bitcoin investors are looking increasingly worried about the fate of the crypto market following recent comments from SEC chair Gary Gensler. The flagship cryptocurrency’s futures and options show a lack of conviction among its traders that could culminate in another bear market. 

Bitcoin Futures Confirm Trader Concerns Over Regulations

China’s indebted real estate market impacted both equities and cryptocurrencies on Monday. However, stock markets have shown a slight recovery since then, while Bitcoin is still struggling at $42,180 after crashing 13% on September 21. 

This development compelled many to question whether impending regulations are hurting the crypto’s price. 

On Tuesday, SEC Chair Gary Gensler reiterated his skeptical view of cryptocurrencies and trading platforms that sell digital assets. He also asserted that his agency has “robust” authority to tackle crypto assets while highlighting that many virtual currencies exhibit the characteristics of securities. 

Attorney Grant Gulovsen believes that the lingering threat of regulations could have a bearish impact on the market. In a recent tweet, he pointed to developments that have been “brewing” over the past six months.

Right now, Bitcoin is at the crucial price level of $42,000, which helped determine the end of the short bear cycle triggered by Elon Musk’s comments on Bitcoin’s energy use in May. 

To gauge market sentiment from this point, traders should consult the 25% delta skew indicator, which compares buy and sell options side-by-side.  When the skew indicator oscillates in the -7% and +7%, it’s termed neutral.  However, when it surpasses this range, it indicates fear among investors.

Data suggests that Bitcoin options traders have been neutral for the last two months. But recent price activity, which pushed the skew indicator to 9%, has induced fear among shorter-term options traders.

Perpetual Futures Market Signals Lack of Confidence in Traders

Perpetual futures market can also help traders obtain a holistic view of the situation. That’s because perpetual futures prices are similar to the ones at spot exchanges, which helps retailers avoid the headaches of calculating the futures premium or manually rolling over positions close to expiry. 

Perpetual futures have a funding rate, which is positive when longs demand more leverage. However, if short-sellers demand more leverage, then the funding rate becomes negative.

Data indicates that Bitcoin’s funding rate has steadily shifted to the negative side, which confirms the fear reflected by the 25% delta options skew. 

Altogether, Bitcoin traders are certainly more anxious following the recent regulatory moves. 

 

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