Bitcoin Derivatives Bearishness Hits Extreme, Raising Odds of Rebound

JH Kim

Summary

An analysis found that bearish sentiment in the Bitcoin derivatives market has reached an extreme level.
Bitcoin’s derivatives risk indicator fell to 1, while the seven-day moving average of perpetual futures funding rates dropped to roughly the bottom 3%% of readings since 2020.
The same setup has occurred 14 times in the past, with an average 30-day return of about 20.8%%, and the market is watching whether extreme pessimism could instead signal a rebound.

Forecast Trend Report by Period

Bearish sentiment in the Bitcoin derivatives market has reached an extreme level, with similar episodes in the past followed by rebounds.

CryptoPotato reported on June 13 that Jamie Coutts, an analyst at Real Vision, said Bitcoin’s derivatives risk indicator had fallen to 1.

The seven-day moving average of perpetual futures funding rates has also dropped to roughly the bottom 3% of readings since 2020, reflecting deeply entrenched bearish sentiment.

Coutts said this setup has occurred 14 times in the past, with an average return of about 20.8% over the following 30 days.

He said current market conditions resemble the 2018-2019 bear market, the Covid-19 shock and the period of China’s 2021 mining ban. He also viewed roughly 50 straight days of negative funding rates as a recovery signal.

The market is focusing on whether such extreme pessimism could instead signal a rebound. Shifts in supply and demand and any recovery in investor sentiment are likely to be the key variables.