The price of Bitcoin (BTC) surpassed $28,000 on March 21, but according to two derivatives metrics, traders aren’t very ecstatic after a 36% gain in eight days. Looking beyond Bitcoin’s stellar performance, there are reasons investors are not fully confident in further price upside. The recent rescue of Credit Suisse, a 167-year-old leading Swiss financial institution, is proof that the current global banking crisis might not be over.

On March 19, Swiss authorities announced that UBS had agreed to acquire rival Credit Suisse in an “emergency rescue” merger in order to avoid further market-shaking turmoil in the global banking sector. The transaction could benefit from more than $280 billion in state and central bank support, which is equivalent to one-third of Switzerland’s gross domestic product. Unfortunately, there is no way to portray this agreement as reassuring or as a sign of strength from financial institutions, including central banks.

The same can be said for the emergency credit lifeline provided by the United States Treasury to protect the banking sector and increase Federal Deposit Insurance Corporation reserves. The “Bank Term Funding Program” (BTFP), launched on March 12, marked a return to Fed liquidity injections, reversing the trend initiated in June 2022, when the Federal Reserve began monthly asset sales.

The global banking crisis prompted the Fed to abandon its inflation-control policies

By lending $300 billion in emergency funds to banks, the Fed completely reversed its strategy to curb inflation, which has been above 5% year-over-year since June 2021, whereas the target is 2%. This strategy, known as tightening, included increasing interest rates and reducing the $4.8 trillion in assets the Federal Reserve accumulated from March 2020 to April 2022.

On March 20, First Republic Bank (FRB) saw its credit ratings downgraded further into junk status by S&P Global, adding to the stress on United States’ regional banks. According to the risk agency, the lender’s recent $30 billion deposit infusion from 11 large banks may not be enough to solve the FRB’s liquidity problems.

Investors in cryptocurrencies are always anticipating a decoupling from the traditional markets. Nonetheless, there are few justifications for an allocation at the moment, especially if coming from corporations, mutual fund managers or wealthy investors. Historically, investors tend to hoard cash positions or short-term government debt instruments during recessionary periods in order to sustain day-to-day operations and possibly be used to purchase bargains.

The yield on six-month U.S. Treasurys, for example, decreased from 5.33% on March 9 to 4.80% on March 20. As investors prepare for the impact of inflation or a recession, or both, this development indicates a greater demand for short-term instruments. The change since March 9 reversed the entire movement from 2023, with the indicator closing 2022 at 4.77%.

Let’s examine Bitcoin derivatives metrics to determine the current market position of professional traders.

Bitcoin derivatives exhibit a balanced demand for long and short positions

Bitcoin quarterly futures are popular among whales and arbitrage desks, which typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts in healthy markets should trade at a 5%–10% annualized premium — a situation known as “contango,” which is not unique to crypto markets.

Since March 15, the BTC futures premium indicator has remained unchanged at 2.2%, indicating no additional demand from leveraged buying activity. Numbers below 5% indicate pessimism, which is not what one would anticipate after price gains of 36% in eight days.

The absence of demand for leverage longs does not necessarily imply a price decline. As a result, traders should investigate Bitcoin’s options markets to learn how whales and market makers value the likelihood of future price movements.

The 25% delta skew is a telling sign showing when market makers and arbitrage desks are overcharging for upside or downside protection. In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to drive the skew metric below -8%, meaning the bearish put options are in less demand.

The delta skew crossed the neutral -8% threshold on March 19, indicating moderate optimism as neutral-to-bullish call options were in higher demand. The excitement, however, did not last long, as the 25% skew indicator is currently at -8%, which is the edge of a balanced situation. Nonetheless, it is the polar opposite of the previous week, when the skew reached 12% on March 13.

Ultimately, professional Bitcoin traders are not bullish above $26,000. This is not necessarily a bad thing, but unless crypto investors regain confidence, the chances of the cryptocurrency surpassing $30,000 remain extremely remote. A complete breakdown of the banking system would cause investors to flee to safety rather than seek out risk.