Earlier today, Bitcoin (BTC) price peaked at $xviii,476 later on an impressive 35% bull run that appears to have started in early September.

This powerful motion was followed by a correction to $17,000, a natural pullback. This adjustment led some investors to question whether the current germination resembles the $13,850 top formed in July 2019.

BTC/USD, July 2019. Source: TradingView

Back then, a xxx% driblet followed a similar-sized rally, and afterwards it took Bitcoin fourteen months to regain the $13,850 level. Coincidently, an intense flash crash happened right afterwards that local high, just the price eventually recovered and stabilized near $12,800.

If something similar happened this time around, investors would expect a $13,000 low for the current cycle. Autonomously from a flash crash following a strong rally, what other indicators mimic the July 2019 price action?

The first footstep is to analyze the futures basis indicator, which can be interpreted every bit investor optimism. Basis is too frequently referred to as the futures premium, and information technology measures the premium of longer-term futures contracts to the current spot (traditional markets) levels.

Fixed-month futures contracts normally merchandise at a slight premium, indicating that sellers request more coin to withhold settlement longer. On healthy markets, futures should trade at a 5% or more annualized premium, otherwise known as contango.

Bitcoin 3-month futures annualized basis, July 2019. Source: Skew

Some excessive optimism might have taken place as the basis indicator touched 20% on June 23. Withal, it sustained very healthy levels through the unabridged price correction back in 2019.

The above nautical chart tin be interpreted as an accented unwillingness to reduce long positions. This motion happened despite a $2,000 wink crash followed by a 30% correction from the top.

Oddly enough, non even the 30% crash that followed the $13,850 top reduced the futures contract premium. Reduced bullishness usually has a massive impact on the basis indicator.

Fast-forward to the electric current scenario, and there isn't a unmarried instance of excessive optimism according to the same metric.

Bitcoin 3-month futures annualized basis, Nov 2020. Source: Skew

The above chart shows the ground indicator speedily falling below 10% right afterwards the $18,500 top germination. To further differentiate the current price action from July 2019, two weeks alee of the price summit the futures premium stood at 0%, a articulate indication that investors were feeling bearish.

This time around, the lowest level over the past couple of weeks has been 7%. This means investors accept kept positive expectations over the past couple of months, whereas in July 2019, the market faced an intense, quick, optimistic rush.

Options traders weren't and then bullish alee of the pump

To better assess the electric current market place sentiment, investors should likewise evaluate options market place spreads. The 25% delta skew indicator will shift to negative when call (neutral/bullish) options are more costly than equivalent put options. The metric ordinarily oscillates between -twenty% to +xx%, and information technology reflects the current market sentiment.

Bitcoin 3-calendar month options 25% delta skew, June 2019. Source: Skew

Oddly enough, Bitcoin underwent an 80% balderdash run in the three weeks preceding the $13,850 top, but the options market seemed ill-prepared for this. At the time, protection for the upside using call options were trading at the same premium every bit the surly puts.

Therefore, we can conclude that option traders were pricing in the same probability of a strong market swing in either direction. This situation has not been the instance recently, as the 25% delta skew indicator shows.

Bitcoin 3-month options 25% delta skew, November 2020. Source: Skew

For the by 30 days, this option market sentiment gauge has been signaling bullishness. Traders are unwilling to sell protection for the upside, thereby causing the skew indicator to attain an unprecedented -30%.

As professional traders are demanding a sizable premium for bullish call options, one can only conclude that a sudden cost dump is far abroad from their expectations.

Investors should not brand decisions solely based on the estimation of a single indicator that shows option traders are overly bullish right now. These traders could have been taken past surprise and therefore are not eager to open up curt positions.

There are substantial differences between July 2019 tiptop and the electric current market according to futures and options markets. This indicates that there are no signs that a 30% drop will occur over the next few days.

The views and opinions expressed here are solely those of the autho r and practise not necessarily reflect the views of Cointelegraph. Every investment and trading motion involves run a risk. You should conduct your own research when making a conclusion.