BTC pulls back 14%. What do professional Bitcoin traders say?

BTC has experienced a 14% price correction, falling to $59,300 after hitting an all-time high of $69,150 on March 5. The challenge now lies in retaking the $64,000 support level. According to BTC derivatives data, professional traders are maintaining a slightly bullish stance despite the short-term volatility.

Bitcoin price plunges after Nasdaq 100 pulls back

Interestingly, Bitcoin’s correction coincided with a 2.6% retracement in the tech-heavy Nasdaq 100 futures, which hit an all-time high of 18,377 on March 4.

Elsewhere, New York Community Bank (NYCB) shares continued to fall after it replaced its CEO, citing “significant deficiencies” in internal controls. Investors sought the safety of gold as it gained 4.2% in four days and is now trading near all-time highs.

The fact that Bitcoin hit an all-time high attracted media attention, which could prompt whales to consider shorting the Bitcoin price or encourage holders to reduce their positions in response to the usual FUD from Bitcoin critics.

For example, the funding rate for Bitcoin perpetual contracts attracted attention when it surpassed 1% on a weekly basis on Feb. 28. However, as @bitcoinmunger, a Twitter user, pointed out, this metric has been indicating investor optimism over the past few months.

Bitcoin professional traders not too excited ahead of all-time high

Essentially, it makes no sense to attribute the sharp correction in Bitcoin’s price solely to the funding rate, as the indicator can remain above 1% per week for an extended period of time without forcing long positions to close. Given favorable market conditions, some traders do not have access to traditional funding, while others simply do not care about fees.

Additionally, retail traders should not act as a proxy for an overheated market, as cryptocurrency investors naturally exhibit bullish tendencies. In contrast, professional traders tend to favor monthly futures contracts to avoid variable funding rate costs. In a neutral market, these instruments trade at a premium of 5% to 10% to account for their longer settlement period.

Bitcoin 2-month futures annualized premium. Source: Laevitas.ch

The data shows that the BTC futures premium was 15% throughout the $5,765 price action on March 5. Essentially, the indicator shows that despite the correction after the all-time high, whales and market makers remain bullish, suggesting that there is little difference between $62,000 and $64,000 as support. Furthermore, even during the all-time high, the BTC futures premium did not exceed 20%, indicating cautious bullish sentiment among traders.

To rule out external factors that may affect only the futures market, one should evaluate Bitcoin options metrics. A 25% Delta deviation is a telling indicator when arbitrageurs and market makers are overcharging for upside or downside protection.

Bitcoin 60-day options 25% Delta deviation. Source: Laevitas

As mentioned above, the 25% Delta Skewness is -7%, which is at the threshold between a neutral market and a bullish market. It is worth noting that the last time Bitcoin options traders got overly excited was on February 19, when the indicator reached -12%. Therefore, the options market supports the view that professional traders are still not convinced that Bitcoin will break through $70,000 anytime soon.

In times of uncertainty, investors tend to seek shelter in short-term bonds and cash positions. This makes sense given the lack of excessive optimism surrounding Bitcoin’s all-time high.

However, this time may be different, considering that inflows into spot Bitcoin exchange-traded funds (ETFs) have taken some money away from gold, suggesting that Bitcoin’s price could maintain bullish momentum regardless of traditional market performance.