The cryptocurrency markets rose 12.5% ​​in the past seven days, reaching a market cap of $ 2.44 trillion. This move doesn’t seem to instill confidence, however, as the same level was tested 16 days ago when a 27% retracement followed Ether (ETH) attempting to break $ 3,650 in the next six days.

Regulation appears to be a major factor for buyers as the U.S. House of Representatives is expected to vote on the $ 1 trillion infrastructure bill this month. In addition to defining who qualifies as a broker, legislation would impose anti-money laundering (AML) and know-your-customer (KYC) requirements for many types of cryptocurrency transactions, which could also be detrimental to DeFi protocols.

Top eight Kryptos 7- and 30-day performances. Source: CoinMarketCap

As shown above, the negative performance of the top 10 cryptocurrencies over the past 30 days has had an impact on investor sentiment. For this reason, it is important to measure more than just the nominal price of Bitcoin. Traders should also analyze BTC’s derivative indicators such as the futures markets premium and options skew.

The futures premium shows that traders are slightly optimistic

The base rate is often referred to as the futures premium and measures the difference between longer-term futures contracts and the current spot market level.

In healthy markets, an annual premium of 5 to 15% is expected, a situation known as contango. This price difference is caused by sellers asking for more money in order to withhold settlement longer.

Bitcoin 3-month futures on an annual basis. Source:

As shown above, the current annual premium of 9% is neutral, but shows an improvement over the last few weeks. This suggests that traders are cautiously bullish and leave room for further long leverage once confidence is fully restored.

Options traders exit “fear” mode

In order to rule out external effects specific to the futures instrument, one should also analyze options markets.

The 25% delta skew compares similar call (buy) and put (sell) options. The metric becomes positive when “fear” prevails, as the premium for protective put options is higher than for similar risk call options.

The opposite is true when market makers are bullish, which causes the 25% Delta Skew indicator to shift into negative territory. Readings between minus 8% and plus 8% are usually considered neutral.

Deribit BTC Options 25% Delta Skew. Source: Laevitas

Notice how Bitcoin options traders entered the “fear” level on September 25th as the USD 41,000 support was tested multiple times. However, there has been a drastic change since September 30th and the indicator is now in a neutral zone.

As things stand at present, both the basis of the futures and the 25% skew of the options show a typical “Glass Half Full” scenario. That means that even though Bitcoin has hit its highest level in 27 days and is above the $ 50,000 resistance, buyers still have room to build additional leverage before the metrics show signs of overstretch or euphoria.

A breakout of $ 50,000 on the current meager derivatives data would normally be interpreted as weakness. However, given that overall cryptocapitalization is still at the same level as it was 30 days ago and the unreserved regulatory concerns, there is nothing to worry about. At present, neither the futures markets nor the options markets are showing any signs of a bear market.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.

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