Bitcoin declined by 8.3% between Sept. 30 and Oct. 1, reaching a two-week low of $60,207. Despite a modest recovery to $61,300 on Oct. 2, Bitcoin’s price remains 16.6% below its March 2024 all-time high, whereas gold and the S&P 500 are each within 2% of their recent record levels.
Given Bitcoin’s underperformance, one might expect traders to adopt a bearish stance; however, BTC derivatives metrics suggest otherwise. Some analysts argue that socio-political uncertainties could negatively impact its short-term price. Historically, Bitcoin tends to outperform other asset classes following major events, indicating potential resilience despite current market pressures.
On Sept. 17, BlackRock published a report titled “Bitcoin: A Unique Diversifier,” highlighting that BTC’s fundamentals differ from traditional assets. The asset manager emphasized Bitcoin’s scarcity and decentralization as unique features and advised clients to view it as a “flight to safety option in terms of fear and around certain geopolitically disruptive events.”
Tensions in the Middle East intensified after Iran launched ballistic missiles at Israel on Oct. 1. According to CNBC, the attack was in retaliation for Israeli ground forces entering southern Lebanon to target an Iran-backed militant group. US National Security Advisor Jake Sullivan reportedly described the recent actions as “a significant escalation by Iran.”
Market uncertainty, which adversely affected Bitcoin’s price, was also fueled by the upcoming US presidential elections in November. Democrat Tim Walz and Republican JD Vance participated in the vice-presidential debate on Oct. 1, but the event did little to alter the trajectory of an exceptionally tight election race, according to Reuters.
Additionally, investors adopted a more cautious approach after automaker Tesla reported third-quarter deliveries slightly below market expectations, resulting in a 4% decline in its shares. However, it is noteworthy that Tesla’s stock appreciated by 20% over the past 30 days, driven by the anticipated “robotaxi event” on Oct. 10 and positive sales data in China, as reported by Yahoo Finance.
Bitcoin derivatives displayed resilience despite the price dip
Under this scenario, one would have expected Bitcoin investors’ sentiment to deteriorate. To assess how whales and arbitrage desks are positioned, one can compare the current demand for leverage with that of the previous week.
Whales and market makers favor monthly Bitcoin futures contracts due to the absence of a funding rate, which causes these instruments to trade at a 5% to 10% premium relative to regular spot markets to compensate for the longer settlement period.
As of Oct. 2, the Bitcoin two-month futures premium has remained near the 7% level, slightly up from 6% the previous week, yet still well within the neutral range. Furthermore, traders exhibited less optimism regarding Bitcoin’s price on Sept. 24, when the indicator dipped below the 5% threshold following a rejection of the key $64,000 level.
To determine whether this sentiment is isolated to the futures market, it is essential to analyze Bitcoin options as well. The 25% delta skew measures the difference between call (buy) and put (sell) option premiums. A skew above 7% indicates excessive downside risk, while values between -7% and +7% are considered neutral.
Over the past seven days, the Bitcoin options delta skew has remained neutral at -1%, demonstrating resilience despite a 3% decline in BTC’s price during this period. This data aligns with the neutral sentiment observed in Bitcoin futures markets, suggesting a balanced and cautious outlook among traders.
Currently, there are no clear indications that Bitcoin traders are adopting a bearish stance, despite ongoing socio-political and economic uncertainties. Consequently, the resilience in BTC derivatives suggests that traders are comfortable with the current price level, while also indicating that bears remain hesitant to bet on further price declines.
