The price of Bitcoin (BTC) dropped by 3.6% to $26,900 following the lawsuit filed by the United States Commodity Futures Trading Commission (CFTC) against Binance and its CEO Changpeng “CZ” Zhao on March 27. Binance has been under scrutiny by various regulatory bodies including the CFTC, the US Securities and Exchange Commission (SEC), the Internal Revenue Service, and federal prosecutors.
The price correction of Bitcoin might have been limited by Silicon Valley Bank’s successful asset sale to First Citizens BancShares at a discount of $16.5 billion. The bank also received an extraordinary credit line from the Federal Deposit Insurance Corporation (FDIC) to offset potential losses in the future.
On the same day, oil prices surged by 5% after Russian President Vladimir Putin heightened geopolitical tensions in Europe by announcing plans to deploy tactical nuclear weapons in neighboring Belarus. This move was seen as a way to intimidate countries supporting Ukraine.
Additional tension surfaced in the crypto industry as a US Federal Judge temporarily halted the proposed sale of Voyager Digital to Binance.US on March 27. Judge Jennifer Rearden of the US District Court in New York granted an emergency stay order in response.
Let’s analyze Bitcoin derivatives metrics to understand the current market sentiment among professional traders.
Bitcoin Futures Unaffected by CFTC-Binance Case
Bitcoin quarterly futures are commonly traded by large investors and arbitrage desks and typically trade at a slight premium compared to spot markets. This premium implies that sellers are demanding more money to delay settlement for a longer period.
Despite Binance holding 33% of the $11.2 billion open interest in Bitcoin futures, the news of the lawsuit had no impact on the futures premium. The premium on the 2-month contract stands at 3.5%, below the neutral 5% threshold. If there was panic selling through leverage futures contracts, the premium would have quickly dropped to 0 or turned negative.
The absence of demand for leverage longs does not necessarily signal a price decline. Traders are advised to look at Bitcoin’s options markets to assess how whales and market makers are gauging future price movements.
Bitcoin Options Traders Remain Slightly Positive
The 25% delta skew indicator reveals whether market makers and arbitrage desks are overpricing the upside or downside protection in options trading. In bearish markets, the skew rises above 8% as investors anticipate price drops. Conversely, bullish markets push the skew below -8%, indicating less demand for bearish put options.
With the 25% skew ratio at -5, it suggests that protective put options are trading at a slight discount, indicating that the Binance news had minimal impact. Moreover, the CFTC lawsuit did not affect the 25% skew, implying that market participants are not factoring in any significant structural changes.
Resilience Amid Uncertainty
Derivatives indicators appear largely unaffected, possibly due to the optimism that the consequences of the Binance-CFTC case might not be severe. This phenomenon, known as the “remote misses” effect, reflects how individuals become more confident in situations where they narrowly avoid negative outcomes.
It is unlikely that the market will anticipate heightened volatility unless there is a substantial correction of more than 3.5% leading to whales and arbitrage desks reassess their positions.
This article is for informational purposes only and does not constitute investment advice. Readers are encouraged to conduct their own research before making any financial decisions.
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