Bitcoin Dips Below $67K Amid Stock Market Decline, Yet BTC Derivatives Remain Steady

On October 21, Bitcoin’s price fell to $67,000, wiping out gains from the previous three days. Analysts attribute this correction to investors pulling back on Bitcoin exposure amid concerns of contagion from traditional markets. Despite this, Bitcoin derivatives metrics have shown notable stability.

Bitcoin futures show no signs of bearish bets.

The Bitcoin futures premium, typically ranging from 5% to 10% in neutral markets, experienced only a minor shift on October 21. A premium above 10% indicates bullish sentiment, and the annualized premium (basis rate) remained above 9% even as Bitcoin tested the $67,000 support level. However, it’s crucial to analyze whether this sentiment is confined to Bitcoin futures or reflects broader trends, as Bitcoin’s price movements have mirrored stock market performance.

Arif Husain, head of fixed-income at T. Rowe Price, stated that the US 10-year Treasury yield is likely to approach the 5% mark in the next six months due to rising inflation expectations and concerns over government spending. Increased yields suggest that investors are seeking better returns by selling bonds.

Bitcoin price has yet to decouple from stocks.

In a volatile macroeconomic landscape, fear, uncertainty, and doubt (FUD) have heavily influenced Bitcoin’s price. Although Bitcoin is often seen as uncorrelated to traditional markets, the 40-day correlation with the S&P 500 has remained above 80% over the past month, indicating a close alignment between the two asset classes. Unlike the mid-July to mid-September period, where Bitcoin and the S&P exhibited low correlation, recent trends suggest both markets are being driven by similar factors.

The correlation between Bitcoin and gold has also risen, surpassing 80% on October 3. Bitcoin options markets further support the idea of derivative resilience. The 25% delta skew indicates that put options are trading at a discount compared to call options. With a current skew near neutral to bullish, traders have not reacted with panic to Bitcoin’s price decline. If expectations for further downside were prevalent, the skew would have shifted towards zero or higher. Overall, Bitcoin derivatives continue to show resilience.

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