The leading cryptocurrency has been unable to break through the $90,000 threshold for more than a week now.
As of March 14, Bitcoin continues to struggle below the $85,000 mark, despite the S&P 500 index witnessing a 1.9% increase. This lack of momentum raises concerns among traders regarding the durability of the current bull market and the persistence of selling pressure.
Bitcoin’s Basis Rate Indicates Steadiness Despite Price Decrease
Following a significant decline of 30% from its peak of $109,354 on January 20, Bitcoin's derivatives market is showing signs of resilience.
The Bitcoin basis rate, which reflects the premium on monthly contracts compared to spot markets, has bounced back after briefly indicating bearish sentiment on March 13. Traders usually seek a 5% to 10% annualized premium as compensation for the longer settlement periods; while Bitcoin’s current basis rate of 5% is lower than the 8% recorded two weeks ago, it remains in a neutral zone. This indicates that leveraged buyers are still participating in the market, albeit with decreased confidence.
The relationship between Bitcoin's price movements and the S&P 500 challenges the long-held belief that Bitcoin operates independently of traditional financial markets. Amid ongoing global economic uncertainties, investors seem to be reducing their exposure to riskier assets such as Bitcoin and are opting for safer investments like short-term bonds.
Nonetheless, central banks are anticipated to implement stimulus measures to avert an economic downturn, which could be beneficial for Bitcoin as a limited asset. According to the CME FedWatch tool, markets currently assess a less than 40% chance of U.S. interest rates dropping below 3.75% from the existing 4.25% benchmark prior to the July 30 Federal Open Market Committee (FOMC) meeting.
Bitcoin Derivatives Show Stability Amid Market Fluctuations
Despite the recent market volatility, Bitcoin derivatives have remained stable. The 25% delta skew, a crucial indicator for options traders, shows that professional traders are not actively hedging against further declines. This suggests that the market does not expect Bitcoin to plummet to $76,900 in the near term.
In bullish environments, put (sell) options typically trade at a discount of 6% or more, while bearish periods see this metric shift to a premium of 6%. While there were brief spikes in bearish sentiment observed on March 10 and March 12, the delta skew has stayed within a neutral range, indicating a robust derivatives market.
Investor confidence is further reflected in Bitcoin's margin market. At OKX, the long-to-short margin ratio is currently reported at 18:1, signaling strong bullish positioning. Historically, extreme confidence has pushed this ratio above 40:1, while levels below 5:1 suggest bearish sentiment. This current ratio resembles that of January 30, when Bitcoin was trading above $100,000.
Over $920 million in leveraged long futures contracts were liquidated in the week leading up to March 13, contributing to short-term volatility. Nevertheless, Bitcoin's derivatives and margin markets show no substantial signs of distress, implying that investor sentiment remains healthy.
