China bans Bitcoin (BTC) — again.

No, we're not traveling back in time. On Sept. 24, the People's Banking concern of Mainland china (PBoC) published a new fix of measures to promote inter-departmental coordination on groovy down on crypto action. The measures intended to "cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law."

Most investors may have missed the $three billion Bitcoin (BTC) and $i.5 billion Ether (ETH) monthly options decease that took place less than one hour before the news of the crypto ban came out. According to "Molly", a quondam Bitcoin Magazine contributor, the remarks from China were originally posted on Sept. three.

However, if some entity were aiming to profit from the negative toll swing, releasing the news ahead of the expiry at 8:00 am UTC on Friday would have made more sense. For instance, the $42,000 protective put option became worthless because the Deribit death price was $44,873. That option holder had a right to sell Bitcoin at $42,000, just there's no value in that if BTC death happens above that level.

For the conspiracy theorists out there, the Chicago Mercantile Exchange (CME) Bitcoin futures decease is the average price between 2:00 pm and 3:00 pm UTC. Consequently, the potential $340 1000000 open interest settled well-nigh the $42,150 level. In the futures markets, buyers (longs) and sellers (shorts) are matched at all times, thus making it virtually impossible to guess which side has larger firepower.

Bitcoin price at Bitstamp in USD. Source: TradingView

Despite the $4,000 negative cost swing, aggregate liquidations on leveraged long futures contracts were less than $120 million. This data should be highly worrisome for bears because it signals that bulls are not overconfident and that they are not using farthermost leverage.

Pro traders showed some doubt but remained neutral

To analyze how bullish or bearish professional traders are, one should monitor the futures premium — likewise known as the "ground charge per unit."

The indicator measures the difference betwixt longer-term futures contracts and the current spot market levels. A 5% to 15% annualized premium is expected in good for you markets, which is a state of affairs known equally contango.

This toll gap is caused by sellers demanding more money to withhold settlement longer, and a crimson alert emerges whenever this indicator fades or turns negative, known every bit "backwardation."

Bitcoin three-month future contracts basis charge per unit. Source: Laevitas.ch

Notice how the sharp decrease acquired past the negative 9% movement on Sept. 24 caused the annualized futures premium to achieve its lowest level in 2 months. The electric current 6% indicator lies at the bottom of the "neutral" range, catastrophe a moderate bullish menses that lasted until Sept. 19.

To confirm whether this movement was specific to that musical instrument, one should also analyze options markets.

Option markets confirm traders are inbound the "fear" zone

The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when "fear" is prevalent every bit the protective put options premium is higher than similar gamble phone call options.

The opposite holds when market makers are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative eight% and positive 8% are usually deemed neutral.

Deribit Bitcoin options 25% delta skew. Source: laevitas.ch

The 25% delta skew had been ranging in the neutral zone since July 24, but it spiked to 10% on Sept. 22, signaling "fear" from options traders. After a cursory retest of the neutral 8% level, today'south Bitcoin price activeness has acquired the indicator to rise above 11%. Once once more, a level final seen 2 months ago, and very like to BTC futures markets.

Although no bearish signs emerged from the Bitcoin derivatives market place, Sept. 24'south dip below $41,000 marked professional traders flip to "fear" mode. The consequence of this is that futures contracts traders are reluctant to open up leverage long positions, while pick markets display a premium for protective put options.

Unless Bitcoin shows forcefulness during the weekend, bears might profit from investors' current panic.

The views and opinions expressed hither are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading motion involves risk. You should conduct your own research when making a decision.