Bitcoin, Ethereum bears are back in control, two derivative metrics suggest

A bearish market structure has actually been pushing cryptocurrencies prices for the past six weeks, driving the total market capitalization to its least expensive level in two months at $1.13 trillion. Oddly, even Litecoin (LTC) displayed no extreme long need after a 14.5% weekly rally.To omit externalities that may have solely affected futures markets, traders can evaluate the markets sentiment by determining whether more activity is going through call (buy) alternatives or put (sell) choices. Even as Bitcoin briefly remedied down to $26,800 on May 12, there was no considerable rise in demand for the protective put options.Glass half complete, or investors prepping for the worst?The alternatives market reveals whales and market makers reluctant to take protective puts even after Bitcoin crashed 8.3% in between May 10 and May 12. Less than 2 weeks remain until June 1, when the U.S. Treasury Department has actually alerted that the federal government could be not able to pay its debts.Related: U.S. financial obligation ceiling crisis: bearish or bullish for Bitcoin?It is unclear whether the total market capitalization will be able to break from the coming down wedge formation.

A bearish market structure has been pushing cryptocurrencies prices for the past six weeks, driving the total market capitalization to its lowest level in two months at $1.13 trillion. According to 2 derivative metrics, crypto bulls will have a hard time to break the sag, although examining a shorter timeframe offers a neutral view, with Bitcoin (BTC), Ether (ETH) and BNB, usually, acquiring 0.3% in between May 12 and May 19. Overall crypto market cap in USD, 12-hour. Source: TradingViewNotice that the coming down wedge formation initiated in mid-April could last up until July, showing that an ultimate break to the advantage would need an extra effort from the bulls. Theres the approaching U.S. debt ceiling standoff, as the U.S. Treasury is rapidly running out of cash.Even if the majority of financiers think that the Biden administration will be able to strike a deal prior to the efficient default of its debt, no one can exclude the possibility of a federal government shutdown and subsequent default.Gold or stablecoins as a safe haven?Not even gold, which utilized to be considered the worlds best asset class, has actually been immune to the recent correction, as the precious metal traded down from $2,050 on May 4 to the present $1,980 level.Related: Bitcoin, gold and the financial obligation ceiling– Does something have to give?Circle, the business behind the USDC stablecoin, has actually ditched $8.7 billion in Treasurys developing in longer than 30 days for short-term bonds and collateralized loans at banking giants such as Goldman Sachs and Royal Bank of Canada.According to Markets Insider, a Circle agent mentioned that:”The addition of these highly liquid assets also provides additional protection for the USDC reserve in the not likely event of a U.S. financial obligation default.”The stablecoin DAI, managed by the decentralized company MakerDAO, approved in March an increase to its portfolio holdings of the U.S. Treasurys to $1.25 billion to “take advantage of the present yield environment and create more profits.”Derivatives markets show no signs of bearishnessPerpetual agreements, also understood as inverse swaps, have an ingrained rate that is typically charged every 8 hours. A positive financing rate shows that longs (purchasers) demand more leverage. Still, the opposite circumstance occurs when shorts (sellers) require additional leverage, triggering the financing rate to turn negative.Perpetual futures collected 7-day funding rate on May 19. Source: CoinglassThe seven-day funding rate for BTC and ETH was neutral, showing balanced demand from leveraged longs (purchasers) and shorts (sellers) utilizing perpetual futures agreements. Curiously, even Litecoin (LTC) displayed no extreme long need after a 14.5% weekly rally.To leave out externalities that might have entirely affected futures markets, traders can gauge the markets belief by determining whether more activity is going through call (buy) alternatives or put (sell) alternatives. BTC choices volume put-to-call ratio. Source: LaevitasThe expiration of choices can include volatility to Bitcoins price, which led to an $80-million benefit for bears in the latest May 19 expiration. A 0.70 put-to-call ratio indicates that put option open interest lags the more bullish calls and is, for that reason, bullish. On the other hand, a 1.40 indication prefers put choices, which can be deemed bearish.The put-to-call ratio for Bitcoin options volume has actually been below 1.0 for the previous number of weeks, indicating a greater preference for neutral-to-bullish call options. Even as Bitcoin briefly corrected down to $26,800 on May 12, there was no significant rise in need for the protective put options.Glass half complete, or investors prepping for the worst?The options market reveals whales and market makers unwilling to take protective puts even after Bitcoin crashed 8.3% between May 10 and May 12. Given the balanced demand on futures markets, traders seem hesitant to place additional bets up until theres more clarity on the U.S. financial obligation standoff. Less than 2 weeks stay up until June 1, when the U.S. Treasury Department has actually alerted that the federal government might be unable to pay its debts.Related: U.S. financial obligation ceiling crisis: bearish or bullish for Bitcoin?It is uncertain whether the total market capitalization will be able to break from the descending wedge development. From an optimistic viewpoint, professional traders are not utilizing derivatives to wager on a catastrophic scenario.On the other hand, there appears to be no reasoning for th bulls to leap the gun and location bets on a fast crypto market healing offered the uncertainty in the macroeconomic environment. So, eventually, bears remain in a comfy place according to derivatives metrics.This article does not contain investment guidance or recommendations. Every investment and trading move involves threat, and readers must conduct their own research study when making a decision.

Other Questions People Ask

What does it mean that Bitcoin and Ethereum bears are back in control?

The return of bears in the Bitcoin and Ethereum markets indicates a prevailing bearish sentiment that has been influencing cryptocurrency prices for the past six weeks. This trend has led to a significant drop in total market capitalization, reaching its lowest level in two months at $1.13 trillion. Traders are observing derivative metrics that suggest a lack of bullish momentum, making it challenging for bulls to regain control in the current market environment.

How do derivative metrics indicate bearish control over Bitcoin and Ethereum?

Derivative metrics, such as the put-to-call ratio and funding rates, provide insights into market sentiment regarding Bitcoin and Ethereum. A put-to-call ratio above 1.0 suggests a preference for protective puts, indicating bearish sentiment, while a neutral funding rate shows balanced demand between longs and shorts. These indicators reflect that traders are cautious and not aggressively betting on a market recovery, reinforcing the bearish outlook.

What impact does the U.S. debt ceiling crisis have on Bitcoin and Ethereum prices?

The ongoing U.S. debt ceiling crisis adds significant uncertainty to the cryptocurrency market, affecting investor sentiment towards Bitcoin and Ethereum. With less than two weeks until a potential default, traders are hesitant to make bold moves, which contributes to the bearish market structure observed. The fear of a government shutdown or default may lead to further declines in cryptocurrency prices as investors seek safer assets.

Are there signs of bullish activity in the Bitcoin and Ethereum derivatives markets?

Despite the bearish control, there are some signs of balanced activity in the derivatives markets for Bitcoin and Ethereum. The put-to-call ratio has remained below 1.0, indicating a higher preference for call options, which suggests some level of bullish sentiment among traders. However, the overall market remains cautious, with traders waiting for clearer signals before committing to significant positions.

What should investors consider when analyzing Bitcoin and Ethereum's current market conditions?

Investors should closely monitor derivative metrics and market sentiment indicators to gauge the potential direction of Bitcoin and Ethereum prices. The bearish market structure indicates that caution is warranted, especially with external factors like the U.S. debt ceiling crisis looming. Additionally, understanding the balance between call and put options can provide insights into whether traders are preparing for a recovery or bracing for further declines.