Bitcoin price action is leaving exchanges, but not in a good way

Stock markets have started to glow a little green this week and Bitcoin (BTC) is leaving the traditional markets – but not in a good way. The cryptocurrency fell 3%, while the Nasdaq Composite technology-heavy stock market index rose 3.1%.

Data from the United States Department of Commerce on May 27 shows the personal savings rate dropped to 4.4% in April, the lowest level since 2008.

For example, Invesco QQQ Trust, a $160 billion tech company-based U.S. exchange-traded fund (ETF), has dropped 23% to date. Meanwhile, the iShares MSCI China ETF, a $6.1 billion follower of Chinese stocks, fell 20% in 2022.

To get a clearer picture of how crypto traders are positioned, traders should analyze Bitcoin derivatives metrics.

Margin traders get more bullish

Margin trading allows investors to borrow cryptocurrency and potentially leverage their trading positions to increase returns. For example, cryptocurrencies can be purchased by borrowing Tether (USDT) to increase risk.

Bitcoin borrowers can only short the cryptocurrency if they bet that its price will drop, and unlike futures contracts, the balance between long-term and short-term collateral is not always matched.

USDT/BTC margin loan rate on OKX exchange. Source: OKX

The chart above shows that traders have been borrowing more USD and Tether lately as the rate has increased from 13 on May 25 to the current 20. The higher the indicator, the more confident professional traders are in Bitcoin price.

It is worth noting that the 29-margin lending rate reached on May 18 is the highest level in more than six months and reflects an upward trend. On the other hand, a USDT/BTC margin loan ratio below 5 is usually a bearish sign.

Options markets plunge into ‘extreme fear’

To exclude externalities specific to margin markets, traders should also analyze Bitcoin options pricing. The 25% delta skew compares similar call (buy) and put (sell) options. When fear is widespread, the metric will turn positive because the premium for the protective put option is higher than for similar risk call options.

The opposite is true when greed is rampant, causing the 25% delta skewness indicator to shift into negative territory. In short, if traders fear a Bitcoin price crash, the skewness indicator will rise above 8%. On the other hand, generalized excitement reflects a negative 8% skewness.

Bitcoin 30-day options 25% delta curve on Deribit exchange. Source: Laevitas.ch

The 25% skew indicator has been above 16% since May 11, indicating a highly unstable situation as market markets and professional traders are unwilling to take down price risks.

More importantly, the last peak of 25.6% on May 14 was the highest 25% skewness in Bitcoin history. Currently, there is a strong bearish sentiment in the BTC options markets.

Related: Falling Bitcoin price does not affect El Salvador’s strategy

Explaining the dichotomy between margin and options

One possible explanation for the divergent mentality between BTC margin traders and options pricing could be the Terra USD (UST) crash on May 10. Market makers and arbitrage desks may have taken heavy losses as the stablecoin lost its stable, and consequently reduced their risk appetite. For BTC options.

Also, according to Loanscan.io, the cost of borrowing USD Tether has dropped to 3% per year on Aave and Compound. This means that traders will benefit from this low-cost leverage strategy, thereby increasing the USDT/BTC margin loan ratio.

There’s no way to predict what will cause Bitcoin to end its current downtrend, so access to cheap financing does not guarantee a positive price action.

The views and opinions expressed herein are solely author and may not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.