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CNBC’s ‘Mad Money’ host Jim Cramer, has added his voice to cryptocurrency’s hottest topic today by noting that the fued issue around Binance and FTX crypto exchanges is “extremely concerning. Cramer said this on Tuesday during an appearance in a ‘Squawk on the Street’ episode. ‘I’ll say this: the opaque nature of the Binance versus […]
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Most investors who follow Bitcoin have recently heard of the increasing influence of Bitcoin futures and options markets on Bitcoin prices. The same goes for the price fluctuations caused by OKEx and Huobi exchange’s liquidation.
Considering that the derivatives market now plays a greater role in Bitcoin price fluctuations, it is becoming more and more necessary to evaluate some key indicators used by professional traders to measure market activity.
Although evaluating futures and options contracts can be quite complicated, the average retail investor can still benefit from knowing how to correctly interpret futures premiums, funding rates, option skew, and put/call ratios.
Futures premium
The futures premium measures the price of long-term futures contracts relative to the current spot prices in the traditional market. It can be seen as a relative reflection of investor optimism, and the trading price of futures is often slightly higher than that of spot exchanges.
In a healthy market, the premium for two-month futures should be between 0.8% and 2.3%. Any number above this range is extremely optimistic. At the same time, the absence of a premium on futures indicates that investors are bearish.
The past week has been like a roller coaster, the futures premium index reached 2% on November 24, and the price of Bitcoin also reached a peak of $19,434.
Although the current premium is 1.1%, but more importantly, despite a 14% drop, this indicator remains above 0.8%. Generally speaking, investors consider this level to be bullish. Yesterday we could see the Bitcoin price hit a new high of over $19,900.
Perpetual Futures Contract Funding Rate
Funding fees for perpetual futures contracts are usually charged every eight hours. The funding rate ensures that there is no risk of transaction imbalance. Even if the positions of the buyer and the seller are always the same, the leverage may be different.
When the buyer (long) uses more leverage, the funding rate will be positive. Therefore, these buyers will pay higher fees. This issue is especially important during bull market periods, because bull market periods usually require stronger bulls.
A funding rate of over 2% per week means extreme optimism. This level is acceptable during market upswings, but if Bitcoin prices are in a sideways or downtrend, this level is problematic.
In this case, the buyer’s high leverage will bring a lot of liquidation possibilities during unexpected price drops.
Please note that despite the recent bull market, the weekly funding rate remains below 2%. This data shows that although traders are optimistic, buyers are not over-leveraged. Similarly, during the $1,400 drop on November 26, this indicator remained at a healthy and neutral level.
Option skew
Unlike futures contracts, options are divided into two parts. The buy option allows the buyer to buy bitcoin at a fixed price on the expiry date. On the other hand, the seller of options will be obliged to sell Bitcoin.
The 25% delta skew of options compares equivalent call (buy) and put (sell) options. If the cost of using call options to prevent price increases is higher, the skew indicator will become a negative range. When investors are short, the situation is just the opposite, leading to premium trading of put options, leading to a positive shift in the skew indicator.
Oscillations between -15% (slightly bullish) and +15% (slightly bearish) are typical and expected. It is very unusual for most markets to remain flat or close to zero most of the time.
Therefore, traders should monitor more extreme situations because they may indicate that the market maker is unwilling to take the risk of either party.
The above chart shows that since November 5th, option traders are reluctant to establish short positions. Therefore, traders will consider this to be a very bullish situation.
Put/call option ratio
By measuring whether more transactions are carried out by buying options or selling options, the sentiment of the entire market can be judged. Generally speaking, call options are used for call strategies, and put options are used for put strategies.
The ratio of put options to call options is 0.70, indicating that the open position of put options is 30% less than the call options, so it is called.
In contrast, the ratio of put options to call options is 1.2, indicating that there are 20% more open put options than call options, which can be considered a put. One thing to note is that this indicator integrates the entire Bitcoin options market.
In the current situation in the market, investors will naturally seek downside protection because Bitcoin exceeds $19,000, even though the put/call ratio is much lower than its six-month average of 0.90. The current 0.64 level shows that professional traders are not pessimistic.
Overall, these four key indicators have remained stable, especially considering that the market has just suffered a traumatic correction and the price of Bitcoin has fallen to $16,200.
With the price of Bitcoin once again breaking through $19,500, almost all investors are wondering whether Bitcoin has enough power to break its all-time high this week.
From the perspective of derivatives trading, nothing can stop it.
Brian Brooks, Director of the Office of the Comptroller of the United States, said that in the global race to develop central bank digital currencies (CBDC), the United States needs to focus on the private encryption sector.
Brooks stated in a hearing of the US House of Representatives Financial Services Committee on Thursday, “We have launched a private stablecoin in the United States, with a market value of tens of billions of dollars.” Brooks was the head of Coinbase’s legal department and currently serves as the U.S. Office of the Comptroller of Currency (OCC). ) Administrator, this agency is responsible for overseeing the Federal Bank and is subordinate to the Ministry of Finance. He explained: “These stablecoins are traded every day. They are growing rapidly and are widely used in commerce.”
He said: “I don’t think we need to develop a solution to govern and control the government in the United States. I think the private sector needs regulation, and I think the regulator should provide a framework for the private sector to ensure that there will be no bank runs or other Issues affecting consumers.”
The Congressional Committee today gathered four members from major financial regulators and asked questions on the issue of digital currency.
Brooks’ comments responded to questions from Minnesota Representative Tom Emmer. Emmer specifically mentioned the commitments in the field of financial technology and the regulatory agencies, staff and measures taken to promote the development of this field.
Emmer also pointed to the OCC and its recent actions, which include providing banks with transparency in cryptocurrency custody. Under the authority granted by Brooks, the OCC provided banks with two transparency aspects in the crypto field this year, allowing banks to custody cryptocurrencies and approving banks to custody stablecoins.
When Emmer returned to the main question posed to Brooks, he mentioned the dislike of Jerome Powell, Chairman of the Federal Reserve Board, against privately developed digital assets. Emmer said: “Chair Powell told us in a previous committee hearing that when the Fed considers launching a digital dollar, individuals and developers in the private sector may not have a place, which is worrying.”
Brooks said to Emmer when talking about the growth of digital assets, “As a country, we have not realized the important competitiveness of digital assets.” He cited the work and experiments China is currently doing in the development of CBDC:
“For the United States, the realization of a nationwide real-time payment system will take several years. I have come to your conclusion that the best solution is to implement what the United States has already achieved, that is, to release innovation and The power of a dynamic and risky private crypto field.”
Brian Brooks, Director of the Office of the Comptroller of the United States, said that in the global race to develop central bank digital currencies (CBDC), the United States needs to focus on the private encryption sector.
Brooks stated in a hearing of the US House of Representatives Financial Services Committee on Thursday, “We have launched a private stablecoin in the United States, with a market value of tens of billions of dollars.” Brooks was the head of Coinbase’s legal department and currently serves as the U.S. Office of the Comptroller of Currency (OCC). ) Administrator, this agency is responsible for overseeing the Federal Bank and is subordinate to the Ministry of Finance. He explained: “These stablecoins are traded every day. They are growing rapidly and are widely used in commerce.”
He said: “I don’t think we need to develop a solution to govern and control the government in the United States. I think the private sector needs regulation, and I think the regulator should provide a framework for the private sector to ensure that there will be no bank runs or other Issues affecting consumers.”
The Congressional Committee today gathered four members from major financial regulators and asked questions on the issue of digital currency.
Brooks’ comments responded to questions from Minnesota Representative Tom Emmer. Emmer specifically mentioned the commitments in the field of financial technology and the regulatory agencies, staff and measures taken to promote the development of this field.
Emmer also pointed to the OCC and its recent actions, which include providing banks with transparency in cryptocurrency custody. Under the authority granted by Brooks, the OCC provided banks with two transparency aspects in the crypto field this year, allowing banks to custody cryptocurrencies and approving banks to custody stablecoins.
When Emmer returned to the main question posed to Brooks, he mentioned the dislike of Jerome Powell, Chairman of the Federal Reserve Board, against privately developed digital assets. Emmer said: “Chair Powell told us in a previous committee hearing that when the Fed considers launching a digital dollar, individuals and developers in the private sector may not have a place, which is worrying.”
Brooks said to Emmer when talking about the growth of digital assets, “As a country, we have not realized the important competitiveness of digital assets.” He cited the work and experiments China is currently doing in the development of CBDC:
“For the United States, the realization of a nationwide real-time payment system will take several years. I have come to your conclusion that the best solution is to implement what the United States has already achieved, that is, to release innovation and The power of a dynamic and risky private crypto field.”
Cointelegraph Chinese is a blockchain news information platform. The information provided only represents the author’s personal views, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. If you need to reprint, please contact the relevant staff of Cointelegraph in Chinese.
According to reports, Indian government officials are planning to discuss a new bill, the legal framework of the bill will prohibit India from trading cryptocurrency.
According to a report by Bloomberg on September 15, the Indian Federal Cabinet is considering enacting a law banning cryptocurrencies. Six months ago, the Indian court lifted a comprehensive ban. An anonymous source said that the Indian government will encourage the development of blockchain technology but discourage cryptocurrency transactions.
Ripple CEO Brad Garlinghouse responded that the decision was “disappointing”, noting that cryptocurrencies have the potential to help underserved people in this country:
Disappointingly, India’s failure in the cryptocurrency market has hindered the development of an emerging industry, and the crypto industry may provide services to groups without bank accounts. -Brad Garlinghouse (bgarlinghouse) September 16, 2020
As of May, about 190 million adults in India have no bank accounts, which means that these adults do not have bank accounts or other financial instruments. Some experts claim that crypto assets like Bitcoin (BTC) are a way to encourage the popularization of financial literacy through simple investment and savings tools.
Before the Reserve Bank of India completely banned banks from engaging in cryptocurrency business in 2018, the country’s crypto market was valued at $12.9 billion. In March of this year, the Supreme Court of India rejected the Reserve Bank of India’s policy, which led to the booming of new exchanges across the Indian subcontinent. Crypto exchanges OKEx and Coinpaprika pointed out in a report in May that after the ban was lifted, OKEx’s website visits increased by 545.56% in the first quarter, and the number of new users also increased by 4100%.
However, since June, there have been reports that Indian government officials are considering a new law that may ban cryptocurrencies. Unlike the Reserve Bank of India’s method of blacklisting banks, the government may now be considering legislative reforms to ban cryptocurrencies, which will reportedly be more binding.
The Indian Parliament reconvened on Monday after being postponed due to the epidemic. However, Tanvi Ratna, CEO of the blockchain consulting company Policy 4.0, said that as of September 13, during the 18-day meeting of government agencies, there was no encryption ban bill.
In June of this year, Ashish Singhal, the founder and CEO of Indian cryptocurrency exchange CoinSwitch, said that compared with 2020, it is more likely to ban digital currencies last year. He said that throughout India, people’s views on cryptocurrencies have changed, and hope the situation will be better.
According to reports, Indian government officials are planning to discuss a new bill, the legal framework of the bill will prohibit India from trading cryptocurrency.
According to a Bloomberg report on September 15, the Indian Federal Cabinet is considering enacting a law banning cryptocurrencies. Six months ago, the Indian court lifted a comprehensive ban. An anonymous source said that the Indian government will encourage the development of blockchain technology but discourage cryptocurrency transactions.
Ripple CEO Brad Garlinghouse responded that the decision was “disappointing”, noting that cryptocurrencies have the potential to help underserved people in this country:
Disappointingly, India’s failure in the cryptocurrency market has hindered the development of an emerging industry, and the crypto industry may provide services to groups without bank accounts. -Brad Garlinghouse (@bgarlinghouse) September 16, 2020
As of May, about 190 million adults in India have no bank accounts, which means that these adults do not have bank accounts or other financial instruments. Some experts claim that crypto assets like Bitcoin (BTC) are a way to encourage the popularization of financial literacy through simple investment and savings tools.
Before the Reserve Bank of India completely banned banks from engaging in cryptocurrency business in 2018, the country’s crypto market was valued at $12.9 billion. In March of this year, the Supreme Court of India rejected the Reserve Bank of India’s policy, which led to the flourishing of new exchanges across the Indian subcontinent. Crypto exchanges OKEx and Coinpaprika pointed out in a report in May that after the ban was lifted, OKEx’s website visits increased by 545.56% in the first quarter, and the number of new users also increased by 4100%.
However, since June, there have been reports that Indian government officials are considering a new law that may ban cryptocurrencies. Unlike the Reserve Bank of India’s method of blacklisting banks, the government may now be considering legislative reforms to ban cryptocurrencies, which will reportedly be more binding.
The Indian Parliament reconvened on Monday after being postponed due to the epidemic. However, Tanvi Ratna, CEO of the blockchain consulting company Policy 4.0, said that as of September 13, during the 18-day meeting of government agencies, there was no encryption ban bill.
In June of this year, Ashish Singhal, the founder and CEO of Indian cryptocurrency exchange CoinSwitch, said that compared with 2020, it is more likely to ban digital currencies last year. He said that throughout India, people’s views on cryptocurrencies have changed, and hope the situation will be better.
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