All bark and some bites. China’s bitcoin ban puts traders in a ‘fear’ zone

China has again banned Bitcoin (BTC).

No, we are not traveling on time. On Sept. 2, the People’s Bank of China (PBoC) unveiled a new initiative to promote inter-departmental coordination on the crackdown on crypto activity. “Shutting down payment channels, disposing of relevant websites and mobile applications in accordance with the law”

Most investors failed to mature the $ 3 billion BTC and $ 1.5 billion Ether (ETH) monthly options that occurred less than an hour after the news of the crypto ban broke. According to Molly, a former Bitcoin magazine contributor, there were comments from China Originally posted 3 September.

However, if some entities were aiming to make a profit from the negative price swing, it would have made more sense to publish the news at UTC on Friday morning before the expiration date. For example, the 42 42,000 protective put option became worthless because the derivative expiration price was 44 44,873. That alternative holder had the right to sell Bitcoin for 42 42,000, but it has no value if the BTC expires above that level.

For conspiracy theorists, the Chicago Mercantile Exchange (CME) Bitcoin Futures expires at 2:00 pm UTC. As a result, the সু 340 million open interest settled near the $ 42,150 level. In the futures market, buyers (tall) and sellers (shorts) always match, so it is virtually impossible to predict which side has the biggest firepower.

Bitcoin price on bitstamp in USD. Source: Tradingview

Despite the $ 4,000 negative price swing, the overall liquidity in the Leveraged Long Futures contract was less than 120 120 million. This information should be extremely worrying for bears as it indicates that bulls are not overconfident and they are not using extreme leverage.

Pro traders showed some skepticism but were neutral

To analyze how bullish or bearish professional traders are, one should observe the futures premium – also known as the “base rate”.

The indicator measures the difference between the long-term futures contract and the current spot market level. The healthy market expects an annual premium of 5% to 15%, a situation known as contango.

This price gap is demanded by sellers to close long-term settlements, and whenever this indicator fades or becomes negative, a red warning arises, known as “retreat”.

Bitcoin is the base rate for 3 months futures contracts. Source:

Notice how the annual futures premium has reached its lowest level in two months as a result of the sharp decline as a result of the 2% September 9 negative %% move. The current 6% index is below the “neutral” range, the moderate bullish time that lasted until September 19th.

To ensure that this movement is specific to that device, alternative markets should also be analyzed.

The alternative market confirms that traders are entering the “fear” zone

25% Delta Skew compares similar call (buy) and put (sell) options. The metric will become positive when “fear” remains prevalent because the protective put option premium is higher than similar risk call options.

The opposite is true when market makers are bullish, causing 25% of Delta diagonal indicators to move to negative areas. Readings between negative %% and positive %% are generally considered neutral.

Derbit Bitcoin options 25% delta diagonal. Source:

Delta Squaw was 25% in the neutral zone from 2% in July, but increased to 10% on 22 September, indicating “fear” of option traders. After a brief re-test of the neutral 8% level, today’s Bitcoin price action index rose above 11%. Again, a level seen last two months ago, and similar to the BTC futures market.

Although no bearish signs have emerged from the Bitcoin Derivatives market, professional traders who have sunk below 41 41,000 today are in “fear” mode. As a result, futures traders are reluctant to open leverage long positions, while option markets offer premiums for protective put options.

If Bitcoin doesn’t show strength over the weekend, Bear could benefit from investors ’current panic.

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