Bitcoin Hits Record High Amid Growing U.S. ETF Demand: Will BTC Reach $80,000?
Summary:
Bitcoin (BTC) reached an all-time high of $73,650 on March 13, reflecting growing demand for U.S. Bitcoin exchange-traded funds (ETFs). The rise has led to speculation of Bitcoin reaching $80,000. Some analysts suggest BTC acts as a hedge against U.S. monetary policy, while others highlight concerns of the potential risks with excessive leverage on Bitcoin futures. The future value of Bitcoin may depend on spot ETFs' adoption as a 'store of value' and potential shifts in Bitcoin’s risk assessment.
On March 13, Bitcoin (BTC) recorded its highest-ever value, reaching $73,650, representing a 44% increase over a 16-day period. This upsurge is largely due to the growing interest in American Bitcoin exchange-traded funds (ETFs), which saw a historic net flow of $1 billion on March 12. There is ongoing speculation about the possibility of Bitcoin attaining an $80,000 value, with seasoned traders maintaining their optimistic leveraged positions.
A viewpoint held by some experts suggests that Bitcoin is being used as a safeguard against the implications of US monetary policies, particularly in light of the 3.2% rise in the Consumer Price Index (CPI) in February compared to last year. This prompts the US Federal Reserve (Fed) to resist additional interest rate reductions, heightening recession fears as it reduces the appeal for businesses to grow and hire.
On the other hand, if the negative outlook - an inflation surge and the Fed being compelled to increase interest rates - materializes, it could adversely affect risk-prone assets like Bitcoin. In times of unpredictability, investors often opt for US Treasury or cash holdings, despite having firm long-term faith in markets like stocks or real estate.
Whether Bitcoin can cross the $80,000 threshold depends on the adoption of Bitcoin spot ETFs as a reserve of value and potential changes in Bitcoin’s risk assessment. Until 2024, most mutual funds and wealth managers found Bitcoin hard to reach. Regulatory ambiguity and its commodity status were major hindrances until the sanction of the US spot Bitcoin ETF on January 11, 2024.
Over the past fortnight, Bitcoin spot ETF products in the US have seen nearly $5 billion in investment, positioning the sector as a key contender for institutional capital. However, some experts express concern about considerable leverage on Bitcoin futures, which could trigger liquidations and subsequent price adjustments.
On March 13, Bitcoin futures open interest reached an all-time high of $35 billion. In addition, leading traders on cryptocurrency exchanges continued to establish leveraged longs. The long-to-short gauge combines positions across spot, perpetual, and monthly futures contracts, offering an in-depth perspective on traders' bullish or bearish sentiment.
Binance and OKX exchanged top traders continued to multiply their net long positions between March 10 and March 13. The consolidated measure reached a 30-day high, indicating increased confidence. Nonetheless, it's too early to assert that the risk of a Bitcoin price plummet has risen.
Arbitrage desks might utilize futures markets in anticipation of high spot Bitcoin ETF inflows, providing a temporary demand cushion. These institutional investors, known as Authorized Participants (APs), receive issuer permission to create and redeem ETF shares. Therefore, heightened leverage demand might be a temporary response to ETF inflow.
Bitcoin derivatives indicate a moderate level of enthusiasm. To determine if professional traders are overly optimistic, it's helpful to refer to Bitcoin options market data. If traders foresee a Bitcoin price fall, the skew metric will rise above 7%, whereas periods of anticipation usually see a skew below -7%.
The 25% delta skew of Bitcoin options currently indicates an optimistic trend but remains within the -7% range, implying excessive optimism is mostly in the futures markets since put options traded at a meager 6% discount than equivalent call options. This data indicates futures demand for Bitcoin doesn’t necessarily signal reckless or increased liquidation risks.
While there's no certainty of Bitcoin exceeding $80,000 soon, BTC derivatives metrics depict confidence, with traders factoring in similar risks for unexpected price swings either way.
The information contained in this article is purely for general understanding and should not be considered as professional investment or legal advice. The author's views are entirely personal and may not represent or reflect the opinions of Cointelegraph.
Published At
3/13/2024 9:35:00 PM
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