Bitcoin price has finally broken through the $28,000 mark, but BTC futures and options data suggests some traders are uneasy about the strength of recent bullish momentum.

Bitcoin

It surpassed $28,000 on March 21, but according to two derivatives indicators, traders aren’t exactly ecstatic after a 36% gain in eight days.Besides Bitcoin’s stellar performance, there are reasons why investors aren’t entirely confident of further price gains.The recent bailout of Credit Suisse, a leading 167-year-old Swiss financial institution, proves that the current global banking crisis may not be over yet.

On March 19, Swiss authorities announced that UBS had agreed to acquire rival Credit Suisse in a “rescue” merger to avoid further turmoil in the global banking sector. The deal could benefit from more than $280 billion in cantonal and central bank support, equivalent to a third of Switzerland’s GDP. Unfortunately, there is no way to describe this agreement as reassuring or a sign of strength for financial institutions, including the central bank.

The same is true for the emergency credit lifeline provided by the U.S. Treasury to protect the banking industry and increase Federal Deposit Insurance Corporation reserves.The launch of the Bank Term Funding Program (BTFP) on March 12 marked a renewed injection of liquidity by the Federal Reserve, reversing a trend that began in June 2022, when the Fed began selling assets on a monthly basis.

Global banking crisis prompts Fed to abandon its inflation control policy

By providing $300 billion in emergency funds to banks, the Fed completely changed its strategy to curb inflation, which has been above 5% since June 2021, while its target is 2%. This strategy, known as tightening, involves raising interest rates and reducing the $4.8 trillion in assets that the Fed accumulated from March 2020 to April 2022.

Adding to the pressure on regional banks in the U.S., First Republic Bank (FRB) had its credit rating downgraded further to junk status by S&P Global on March 20. The lender’s recent $30 billion deposit injection from 11 large banks may not be enough to solve FRB’s liquidity problems, according to the risk agency.

Investors in cryptocurrencies always look forward to a decoupling from traditional markets. Nevertheless, there is little reason to allocate at this time, especially if it comes from companies, mutual fund managers or wealthy investors. Historically, investors tend to hoard cash positions or short-term government debt instruments during recessions to maintain daily operations and potentially use them to buy bargains.

For example, the yield on the six-month Treasury bill fell from 5.33% on March 9 to 4.80% on March 20. The development suggests an increase in demand for short-term instruments as investors prepare for the impact of inflation or recession or both. The change since March 9 reverses the entire trend since 2023, when the indicator closed 2022 at 4.77%.

Let’s examine Bitcoin derivatives indicators to determine professional traders’ current market position.

Bitcoin derivatives show balanced demand for long and short positions

Bitcoin quarterly futures are popular among whales and arbitrage platforms, and they often trade at a slight premium to the spot market, suggesting that sellers are demanding more funds to delay settlement for a longer period of time.

Therefore, futures contracts in a healthy market should trade at an annualized premium of 5%–10% — a situation known as “contango,” which is not unique to crypto markets.

The BTC futures premium indicator has remained unchanged at 2.2% since March 15, indicating no additional demand from leveraged buying activity. Figures below 5% indicate pessimism, which is not what one would expect after a 36% price increase in eight days.

The absence of leveraged long demand does not necessarily mean that the price will fall. Therefore, traders should investigate Bitcoin's options market to understand how whales and market makers assess the probability of future price movements.

A 25% delta deviation is a telltale sign of when market makers and arbitrage desks are overcharging for upside or downside protection. In a bear market, options investors give higher odds of a price crash, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to push the skew indicator below -8%, meaning there is less demand for bearish put options.

Delta Deviation crossed the neutral -8% threshold on March 19, indicating moderate optimism as demand for neutral to bullish call options increased. However, the excitement did not last long, as the 25% skew indicator is currently at -8%, which is on the edge of a balanced scenario. Still, this is a stark reversal from the previous week, when the skew reached 12% on March 13.

Ultimately, professional Bitcoin traders are not bullish above $26,000. This is not necessarily a bad thing, but unless crypto investors regain confidence, the chances of the cryptocurrency exceeding $30,000 remain very slim. A complete collapse of the banking system would cause investors to flee to safety rather than seek risk. Delta Deviation crossed the neutral -8% threshold on March 19, indicating moderate optimism as demand for neutral to bullish call options increased. However, the excitement did not last long as the 25% skew indicator is currently at -8%, which is on the edge of a balanced scenario. Still, this is a stark reversal from the previous week, when the skew reached 12% on March 13.

C3 Tip: The views, thoughts and opinions expressed here are the author's own and do not contain investment advice or recommendations. Every investment and transaction involves risk.