Technical Indicators Shows Bitcoin Is Ready For a 65% Upside move

Bitcoin has stayed below $45,000 for about two weeks now. The coin sits at 40% below its all-time high of $69,000. This price action of bitcoin is quite familiar to that of late September when bitcoin price stayed down for 11 days straight. It was 37% below its April 15th all-time high of $64,900.

To figure out if the current price momentum of bitcoin matches that of last September, traders need to analyze the ‘basis’ which is also called Bitcoin futures contracts premium. The prices are expected to differ vastly because unlike a perpetual contract, these fixed-calendar futures do not have a specific funding rate.

By measuring the expense gap between regular spot marker and futures, a trader will be able to note the level of bullishness in the crypto market.

However, due to increased optimism of buyers who use brokers like eToro, the usual 3 months futures contract will then trade at 15% or at a higher ‘basis.’

Analyzing The Three-months Futures From September Last Year

Earlier in September last year, the rate of ‘basis’ ranged from about 8% to 13% indicating confidence. But right before bitcoin broke out above $45,000 on the 29th of September, the 3-months futures premium was at 7.2%.

In a more general sense, readings below 5% are deemed bearish so a 7.2% reading occurring in late September meant that Bitcoin investors were displaying low confidence.

The Incoming 3-months Futures Premium Of Bitcoin

Judging the current bitcoin situation, there is a lot that resembles the occurrence of late September that saw Bitcoin break from $45,000 and moved towards a 63% rally. 

It will interest you to know that the current bitcoin 3-months premium stands at 6.5% and the indicator which ranges from 9 to 11% currently reflects mild optimism from investors.

Since the inception of bitcoin, you will find that unexpected positive market action happens when investors aren’t expecting it. Interestingly, this is the situation happening currently.

To verify if these indications are correct and not just specific to the measuring instruments employed, one must also analyze the options market, said Barnard Johnson, head of coin operations at a trading firm in Korea, Kitsa. 

Another indication to look out for when trying to ascertain the outlook of bitcoin is the 25% delta skew. 

The 25% delta skew is a trading tool indicator used in comparing equivalent buy and sell options for traders. The indicator will turn positive when the elements of “fear” are prevalent due to ‘protective put premium’ being higher than the call options.

When this 25% delta skew moves to the native direction, it indicates the opposite. It indicates the bullish outlook of bitcoin. Readings between the negative 8 and positive 8 on the scale of delta skew are deemed to be neutral.

Comparing Bitcoin 25% Skewness Of Last Year September With Current Standings.

In the previous year, September precisely, the 25% delta skew ranged near 10% indicating a level of distress from option traders. Surprisingly, arbitrage desks and market makers were getting ready to assume protective bearish positions.

The current indications of 25% delta skew, shows option traders are neutral. However, on the 10th of January, the indicator showed delta skew at 8% positive threshold which signals a mild degree of bearishness.

The current situation of bitcoin closely resembles the metric situation of late September 2021. This saw an increase in Bitcoin price by 62%. Will this repeat itself?