Bitcoin (BTC) underwent a significant price correction of 14%, dropping to $59,300 after reaching an unprecedented high of $69,150 on March 5. The key challenge now is to reclaim the $64,000 support level. Despite the short-term volatility, professional traders in the BTC derivatives market maintain a slightly bullish stance.
Interestingly, Bitcoin’s correction coincided with a 2.6% retracement in the tech-heavy Nasdaq-100 index futures, which had reached an all-time high of 18,377 on March 4. The stock market showed early signs of stress after a consumer research firm estimated a 24% decline in Apple iPhone sales in China.
Additionally, shares of New York Community Bancorp (NYCB) continued to decline following the replacement of its CEO, citing “material weaknesses” in internal controls. Investors sought refuge in gold, leading to a 4.2% increase in the precious metal’s price over four days, currently trading near its all-time high.
The media attention surrounding Bitcoin’s new all-time high may have attracted the interest of whales considering shorting the cryptocurrency or encouraged holders to reduce their positions due to criticism from Bitcoin critics. However, attributing the sharp price correction solely to the funding rate on Bitcoin perpetual contracts is not entirely accurate. The funding rate can remain above 1% per week for an extended period without necessarily forcing bullish traders to close their positions.
It is important to note that retail traders should not be seen as a proxy for overheated markets, as cryptocurrency investors tend to exhibit a bullish trend naturally. Professional traders, on the other hand, often prefer monthly future contracts to avoid variable funding rate costs. In neutral markets, these contracts trade at a premium of 5% to 10%.
Data reveals that the BTC futures premium stood at 15% during the entire $5,765 price move on March 5. This suggests that whales and market makers remain bullish despite the correction, indicating that there may be little difference whether $62,000 or $64,000 becomes a support level. Moreover, the BTC futures premium did not exceed 20% even during the all-time high, indicating cautious bullish sentiment among traders.
To further analyze the market sentiment, one should consider Bitcoin options metrics. The 25% delta skew, which measures the pricing of upside or downside protection, currently stands at -7%, indicating a threshold between neutral and bullish markets. This suggests that professional traders are still not convinced that Bitcoin will break above $70,000 in the near future.
Typically, during periods of uncertainty, investors seek refuge in short-term bonds and cash positions. However, this time may be different due to the inflow of capital from gold into the spot Bitcoin exchange-traded fund (ETF). This suggests that BTC’s price could sustain its bullish momentum regardless of the performance of traditional markets.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should conduct their own research before making any decisions.