The price of Bitcoin (BTC) is facing an intense period of volatility since moving from a $52,950 acme on Sept. 7 to a $42,800 depression only two hours later. More than recently, the $45,000 back up was held for a couple of days despite existence heavily tested, and this triggered a $3,400 upwards- and down-swing on Sept. 13.

At that place'south little doubt that shorts — traders betting on a price decrease — have taken the upper hand since the liquidation of $3.54 billion worth of long (buyers) futures contracts on Sept. 7.

MicroStrategy's Sept. 13 annunciation that it added over 5,050 Bitcoin at an boilerplate toll of $48,099 was not enough to reestablish confidence, and the cryptocurrency's price remained unchanged near $44,200.

While the impact of shorts may be beingness felt, it'south more than probable that regulatory concerns keep to suppress markets, every bit the United states of america Treasury Department has reportedly discussed potential regulation for private stablecoins, as reported by Reuters on Sept. 10.

The growing interest from regulators comes as the stablecoin market place capitalization has grown from $37 billion in January to its current $125 billion. Furthermore, both Visa and Mastercard have reiterated their interest in stablecoin-related solutions.

Regardless of the reason behind the current price weakness, derivatives contracts have been displaying bullish sentiment since Aug. 7.

Professional traders have been bullish for the past five weeks

Bitcoin quarterly futures are the preferred instruments of whales and arbitrage desks because they have the significant advantage of lacking a fluctuating funding rate. Withal, these might seem complicated for retail traders due to their settlement date and the price difference from spot markets.

When traders opt for perpetual contracts (changed swaps), derivatives exchanges charge a fee every eight hours depending on which side demands more leverage. Meanwhile, fixed-appointment expiry contracts typically trade at a premium from regular spot marketplace exchanges to compensate for the delayed settlement.

Bitcoin iii-calendar month futures annualized premium. Source: Laevitas

A 5% to fifteen% annualized premium is expected in healthy markets considering the money locked in these contracts could otherwise be used on lending opportunities. This situation is known as contango and happens on nearly every derivatives instrument.

However, this indicator fades or turns negative during surly markets, causing a ruddy flag known every bit "backwardation."

The above chart shows the premium (basis charge per unit) rising above eight% on Aug. 7 and sustaining this moderate bullishness ever since. Thus, data is exceptionally healthy and depicts hardly whatever lack of conviction, even with Bitcoin testing the sub-$44,000 level twice in the past 15 days.

Related: Regulatory and privacy concerns trail SEC'due south threat to Coinbase

Futures open interest remains healthy

The $3.54 billion in liquidations across derivatives markets on Sept. 7 definitely injure overleveraged traders, but the open interest on Bitcoin futures is still healthy in the grand scheme of things.

Bitcoin futures aggregate open interest in USD. Source: Bybt

Check out how the current $14.8 billion figure is 23% higher up June'south and July'southward $12 billion average. This contradicts speculations that traders have been severely impacted and are hesitant to create positions due to Bitcoin's volatility or somehow fearing an impending bearish effect.

There should be no doubt, at least co-ordinate to futures markets, that investors are neutral to bullish despite the recent price correction. Of form, traders should monitor important resistance levels, but and so far, $44,000 has held firm.

The views and opinions expressed here are solely those of the author and exercise not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a determination.