Bitcoin experienced a drop in price on October 21, falling to $67,000 and erasing the gains of the previous three days. Analysts believe that one reason for this correction was investors reducing their Bitcoin exposure due to concerns about the impact of traditional markets. However, despite these concerns, demand for Bitcoin derivatives as a hedge remained stable, suggesting that investors were not anticipating further decline.
The premium on Bitcoin futures, which typically ranges between 5% and 10% in neutral markets, was only slightly affected on October 21. The higher pricing of monthly BTC futures, which indicates bullish sentiment, remained strong even as Bitcoin retested the $67,000 support level.
It is important to note that the sentiment observed in Bitcoin futures markets may not be isolated. Based on price charts, it appears that Bitcoin’s price movement mirrored the performance of the stock market throughout the day.
Arif Husain, head of fixed-income at T. Rowe Price, stated that the US 10-year Treasury yield is expected to reach the 5% threshold in the next six months. This is driven by rising inflation expectations and concerns over government fiscal spending. The increase in yields suggests that investors are seeking higher returns by selling their bonds.
Bitcoin’s price trends have been significantly influenced by fear, uncertainty, and doubt (FUD) in the macroeconomic environment. While Bitcoin has historically been seen as uncorrelated to traditional markets, recent data suggests that it has become more aligned with the S&P 500 and gold. The 40-day correlation between Bitcoin and the S&P 500 has remained above 80% in the past month.
Bitcoin options markets also support the idea of derivatives resilience. The 25% delta skew metric shows that put options are trading at a discount compared to call options, indicating a neutral to bullish market.
Overall, the reaction of derivatives traders to Bitcoin’s recent price decline suggests that they are not panicked and do not anticipate further downside. Bitcoin derivatives continue to demonstrate resilience in the face of market fluctuations.
Please note that this article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.