The battle between cryptocurrency bulls and bears shows hope for the future

The blockchain space is seeing some areas of strength despite the perceived market downturn. Perpetual futures funding rates for Bitcoin (BTC) and Ether (ETH) have turned positive on major exchanges, which shows bullish sentiment among derivatives traders. Additionally, Bitcoin has begun trading below its cost base, which has marked previous low-end areas in the market. In contrast, decentralized finance (DeFi) saw a 33% decrease in total locked value in June, and crypto stocks delivered an average monthly return of -42.7%.

A battle is underway between bullish and bearish sentiments in different areas of the market. To help cryptocurrency traders maneuver on the battlefield, Cointelegraph Research recently launched its monthly “Investor Insights Report”. In the report, the research team analyzes the major market events of the past month and the most critical data across various sectors of the industry. Researchers provide expert analysis and insights that can benefit serious blockchain market participants.

Derivatives can provide a key indicator of changing feelings

Up until June, there had been strong bearish sentiment in the market. An indicator of bearish and bullish sentiment is the volatility skew of a market. The greater the skew range, the greater the volatility, while tighter ranges suggest less volatility, which implies more confidence in the market. On June 18, the 25-delta skew of Bitcoin options peaked at 36%, the highest on record. Some optimism has since returned, bringing skew down to 17%. This signals a strong belief that the cryptocurrency market will pick up in the coming months.

Long call rewards on Bitcoin and Ether indicate that traders are optimistic about the end of the year. However, solvency problems and the risk of contagion are still present in the market and in the minds of investors and regulators.

In side markets, traders can use chokes to generate returns if Bitcoin stays in range. Strangles involve selling puts and calls at different strike prices. The idea of ​​a strangulation is as the name suggests: placing a put (an option to be sold) and a call (an option to be bought) below and above the current spot price. For example, if Bitcoin is at $ 20,000, you first sell a put at $ 15,000 down and a call at $ 30,000 up. If they expire after a month, the rewards translate into earnings minus transaction fees.

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Currently, options skew is steeply sloping, with an implied volatility differential of up to 10% between strike prices of $ 17,000– $ 24,000 on Deribit and the Chicago Mercantile Exchange. This indicates a good setting for a risk reversal involving a short put at $ 17,000 and a long call at $ 24,000.

Is the bullish sentiment starting to repel the bears?

Bitcoin’s unrealized net loss hit a three-year low, showing that its current market value is nearly 17% below that of its aggregate cost base. Historically, global lows formed when losses hit more than 25%. The falling moving averages and the relative strength index in the oversold zone indicate that the bears are in control.

However, for the first time since March 2020, Bitcoin has been trading below its mining cost base, a level that has historically marked global capitulations and Bitcoin price lows. The unrealized profit / loss indicator is further evidence that the bulls could potentially overtake the bears.

From derivatives to the NFT sector

The Investor Insights Report covers various other topics such as security tokens, DeFi, blockchain games, cryptocurrency mining, blockchain-related stocks, regulation, and venture capital investments. Subject matter experts stay up to date on all the latest news and trends to cut weeds and provide essential insights into the blockchain industry.

Each section of the report covers important elements that impact the subject. Subject matter experts cover the most important events that will have a significant impact, and the information is presented in an easily understandable format that serious participants in the cryptocurrency market can use to get an overview, highlights and a forecast of what could be. on the horizon. The newsletter is now available for subscription and features comprehensive charts and detailed analysis.