The Daily Dive #128 - Derivatives Market Analysis

Yesterday, cascading long liquidations drove the price of bitcoin below $43,000 as bears broke the previously strong $45,000 resistance level. Today we’ll overview the latest derivative market metrics to assess the overall health of the market. 

Perps funding remains muted but positive, with derivative traders staying bullish despite bitcoin trading 37% below its all time high. 

If we take a daily moving average of the funding rate, and weight it by open interest, you get a very interesting view of the market. This recent sell off and liquidation event was less aggressive than recent ones previous.

Here is a heatmap style view of the perpetual futures funding rate over the last two years. Funding has yet to turn negative persistently as it did over the summer. 

Lastly, the rolling three month annualized futures basis fell to 7.99% during the move. 

At some point in the future, potentially due to macroeconomic uncertainty,  funding rates will flip persistently negative and the futures basis will trade in backwardation; 

This will likely be the time to meaningfully increase allocation and possibly leverage with responsible risk management. For most, simple recurring bitcoin accumulation plans are optimal. 

Dylan LeClair 🟠 @DylanLeClair_

relevant i think https://t.co/EsVTqdeN8U

Dylan LeClair 🟠 @DylanLeClair_

Base case is $BTC consolidates into Q1 2022. Right now incumbents are just trading against each other, chopping each other to death. Here's my current thoughts on the state of the market. [THREAD]

Dylan LeClair 🟠 @DylanLeClair_

Read the last sentence 🤝 https://t.co/OYGJrxYwLk

Dylan LeClair 🟠 @DylanLeClair_

This is when the $BTC moon mission resumes. Capital inflows into the market are here, but in order to become a multi trillion dollar asset class, another catalyst likely needs to arrive. Just stack sats, cut back on the mark to market leverage, & enjoy the ride. [END]