Is the bottom in? Data shows Bitcoin derivatives entering the ‘capitulation’ zone

Analysts love to issue price predictions and it seems that nine out of 10 times they are wrong. For example, how many times did analysts say “we will never see Bitcoin back at X price again,” only to see it plunge well below that level a few months later? 

It doesn’t matter how experienced a person is or how connected in the industry. Bitcoin’s (BTC) 55% volatility must be taken seriously and the impact this has on altcoins is usually stronger during capitulation-like movements.

I was undeniably wrong about how much crypto could fall from macro contagion.

I remain bullish on the space as a whole and think it is the most important mega-trend of our times.

I joined CT during 2018 and I will be here with you guys in the coming yrs, bull or bear.

— Zhu Su (@zhusu) January 24, 2022

For those unfamiliar with the case, on Dec. 7, Zhu Su’s Three Arrows Capital acquired $676.4 million worth of Ether (ETH) after its price collapsed 20% over 48 hours. Zhu went as far as saying that he would continue to buy “any panic dump,” despite acknowledging that Ethereum fees were unsuitable for most users.

To understand whether there is still an appetite for bearish bets and how pro traders are positioned, let’s take a look at Bitcoin’s futures and options market data.

Futures traders are unwilling to short

The basis indicator measures the difference between longer-term futures contracts and the current spot market levels. A 5% to 15% annualized premium is expected in healthy markets and this price gap is caused by sellers demanding more money to withhold settlement longer.

On the other hand, a red alert emerges whenever this indicator fades or turns negative, a scenario known as “backwardation.”

Bitcoin 3-month futures basis rate. Source:

Notice how the indicator held the 5% threshold despite the 52% price correction in 75 days. Had pro traders effectively entered bearish positions, the basis rate would have flipped closer to zero or even negative. Thus, data shows a lack of appetite for short positions during this current corrective phase.

Options traders are still in the “fear” zone

To exclude externalities specific to…



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