August Turbulence and Optimistic Indicators

Bitcoin (BTC) endured a harsh August, plummeting over 13% to a nadir of $50,000 within the first five days, driven by factors like the unwinding of yen carry trades and apprehensions regarding the U.S. economy. However, amidst the market turmoil, two significant indicators provide a glimmer of hope.

Long-Term Options Skew Signals Resilience

Despite the recent downturn, the 180-day call-put skew for bitcoin options listed on the prominent exchange Deribit remains buoyant, consistently above 3, as per Amberdata. This skew implies a sustained bias for price strength over the next six months. A call option grants the holder the right, but not the obligation, to purchase the underlying asset at a predetermined price at a future date, embodying a bullish market stance. Conversely, a put option signifies a bearish outlook. Options skew gauges investors’ propensity to pay for an asymmetric bullish or bearish payout, with positive values indicating stronger demand for upside or calls.

This bullish long-term outlook aligns with the perspective of some analysts who believe that once the initial shock from global market volatility subsides, bitcoin will rebound.

“The ongoing slowdown in the U.S. economy suggests that the Federal Reserve, trailing behind, will have to cut rates more aggressively than previously anticipated. Consequently, U.S. Treasury yields and the dollar are repricing lower, which is immensely bullish for bitcoin. Moreover, with China intensifying stimulus and liquidity injections alongside a weaker dollar, global liquidity conditions are set to accelerate,” stated the founders of the newsletter service LondonCryptoClub in Monday’s edition.

“Bitcoin appears to be the most evident trade for a Fed that is behind the curve and poised to slash rates and amplify liquidity. Brace for a volatile few weeks, but keep an eye on the broader picture,” they added.

Cumulative Volume Delta (CVD) Indicates Dip-Buying

The sharp sell-off has been marked by dip-buying on U.S. exchanges such as Coinbase, Gemini, and Kraken, according to cumulative volume delta (CVD) data tracked by Paris-based Kaiko.

CVD represents the total difference between the volume of trades executed at the ask price (buying) and trades executed at the bid price (selling) over a specified period. A rising positive CVD signifies that buying volume exceeds selling volume, whereas a declining and negative CVD indicates the opposite.

Since August 1, the CVD on Coinbase, Gemini, and Kraken has predominantly remained positive, indicating net buying pressure or bargain hunting during price declines.

“Interestingly, while offshore exchanges like Binance and OKX experienced strong selling since Friday, BTC’s cumulative volume delta (CVD) on most U.S. platforms remained positive, suggesting that some traders bought the dip,” Kaiko mentioned in a note published on Monday.