What Does it Mean for Crypto Investors?
Bitcoin, the world’s largest cryptocurrency, experienced a price correction of 3.6% to $26,900 after the United States Commodity Futures Trading Commission (CFTC) sued Binance and CEO Changpeng Zhao on March 27. The CFTC’s recent action against Binance does not appear to have had any impact on professional traders, according to metrics for Bitcoin derivatives.
BTC Futures Market Remains Healthy Despite CFTC’s Legal Action
The quarterly Bitcoin futures market, which is well-liked by whales and arbitrage desks, is presently trading at a slight premium to spot markets, implying that sellers are demanding a higher price to postpone settlement for a longer period of time. A healthy futures market should trade at a 5%–10% annualized premium, known as contango, which is currently not unique to crypto markets.
The Binance news had no effect on the Bitcoin futures premium, despite the fact that the exchange holds 33% of the $11.2 billion in open interest. This suggests that there was no panic selling or use of leveraged futures contracts, which would have quickly moved the indicator to zero or even negative.
BTC Options Traders Remain Slightly Optimistic
The 25% delta skew, which indicates when market makers and arbitrage desks are overcharging for upside or downside protection, is currently at -5. This demonstrates that the Binance news is unimportant because the protective put options are trading at a slight discount. Additionally, the legal action taken by the CFTC had no impact on the 25% skew, showing that market makers and whales are not factoring in any significant changes to the market structure.
Conclusion: Crypto Investors Should Remain Cautiously Optimistic
Bitcoin’s price correction in the wake of the CFTC’s lawsuit against Binance has not had a significant impact on the cryptocurrency’s derivatives markets. The impact of the lawsuit on Binance and its CEO is still uncertain, but market indicators suggest that professional traders are not panicking, so cryptocurrency investors should maintain a cautious optimism. When investing in cryptocurrencies, investors should proceed cautiously and with due diligence as always.
