The price of Bitcoin (BTC) fell 3.6% to $26,900 after Binance and its CEO Changpeng “CZ” Zhao were sued by the United States Commodity Futures Trading Commission (CFTC) on March 27. To date, Binance has been investigated by the CFTC, the US Securities and Exchange Commission (SEC), the Internal Revenue Service and federal prosecutors.
Bitcoin’s price correction may be limited by the sale of the assets of the successful Silicon Valley bank to First Citizens BancShares at a discount of $16.5 billion, which received an outstanding line of credit from the Federal Deposit Insurance Corporation (FDIC) to offset potential future losses.
Oil prices also rose 5% on March 27 after Russian President Vladimir Putin escalated geopolitical tensions in Europe. According to Yahoo!Finance, Russia is planning to deploy tactical nuclear weapons in neighboring Belarus, a move designed to intimidate rival countries into supporting Ukraine.
Further tension from the crypto industry emerged after a US Federal Judge decided to temporarily halt the sale of Voyager Digital to Binance.US. on March 27, Judge Jennifer Readden of the US District Court in New York granted a request for an emergency stay.
Let us examine the Bitcoin derivative metrics to determine the current market position of professional traders.
Bitcoin futures do not show the impact of the CFTC-Binance case
Bitcoin quarterly futures are popular among whales and arbitrage tables, which usually trade at a slight premium to the market, indicating that sellers are asking for more money to delay settlement for a longer period of time.
As a result, futures contracts in a healthy market must trade at an annual premium of 5% to 10% – a situation known as contango, which is not unique to the crypto market.
The Binance news had no effect on the Bitcoin futures premium, despite the fact that the exchange has 33% of open interest of $11.2 billion. The 2-month contract premium is 3.5%, which is below the neutral 5% threshold. If there is some panic selling using leveraged futures contracts, the indicator will quickly move to 0 or even negative.
No demand for leveraged longs does not necessarily indicate a decline in prices. As a result, traders should investigate the Bitcoin options market to understand how whales and market makers value possible future price movements.
Bitcoin options traders remain somewhat optimistic
The 25% delta skew is a sign indicating that market makers and arbitrage tables are overcharging for price protection or decline. In a bear market, option investors give a higher probability of a price dump, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to push the skew metric below -8%, meaning bearish options are less desirable.
The 25% skew ratio is at -5, indicating that protective put options are trading at a slight discount, confirming the irrelevance of the Binance news. More importantly, the CFTC’s actions had no effect on the 25% skew, so the whales and the market did not price in a significant change in market structure.
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What doesn’t kill you makes you stronger
The fact that the derivative indicators are almost unaffected can be a “remote miss” effect because analysts and experts evaluate the possibility of Binance and CZ getting a fine of more than a million dollars and some action adjustments.
This type of psychological distortion was first observed in London during World War II, when survivors who did not experience close losses became more self-confident and less traumatized.
It seems unlikely that the market will price in the possibility of higher volatility until the whales and arbitrage tables face a price correction of more than 3.5%.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.