Bitcoin Rises amid ETF Influx and Economic Uncertainty: Expert Traders Stay Cautious
Summary:
Bitcoin has seen a substantial rise of 21.2% seeking to establish support around $52,000, largely due to a boost in the inflow into spot Bitcoin ETFs and global macroeconomic uncertainties. However, Bitcoin derivatives metrics are not showing the same level of optimism, indicating doubt among professional traders about the current bull run's sustainability. Indications show moderate bullish views without signs of FOMO or reckless use of high leverage, pointing to potential gains beyond $52,000.
From February 7 to February 15, Bitcoin (BTC) saw a significant rise of 21.2%, with traders seeking to cement a support level around the $52,000 mark. The surge this week is thought to be due to a swell in inflows into spot Bitcoin exchange-traded fund (ETF) instruments as well as global macroeconomic uncertainties. Yet, the excessive optimism seen across the market is mismatched with the metrics seen in Bitcoin derivatives, hinting that expert traders doubt the longevity of this bullish wave.
Over the past week, spot Bitcoin ETFs have seen a net inflow of $2.4 billion. This can be partly accredited to early signals of a downturn in the U.S. economy, particularly within consumer sectors. January saw U.S. retail sales drop by 0.8% as compared to the previous month as reported by the Census Bureau. Furthermore, both Japan and the United Kingdom have dipped into technical recessions after two consecutive quarters of falling gross domestic product (GDP).
There's a discussion brewing amongst traders regarding the continuous institutional demand for Bitcoin in light of the latest unfavourable economic data for risk-on markets. In uncertain times, investors tend to gravitate towards stable, fixed-income assets. To determine the comfort level of high-net-worth investors (whales) and arbitrage desks with Bitcoin's $52,000 support, an analysis of BTC derivatives markets is necessary.
A positive perpetual contract funding rate signifies a surge in demand for leverage among buy positions, whereas a negative rate shows sell positions requiring increased leverage.
The Bitcoin perpetual contracts’ funding rate has remained fairly stable over the recent week, indicating balanced demand and a neutral market. For comparison, the rate stood at 1% per seven days in late 2023, showcasing excessive optimism. Intriguingly, Bitcoin's price at the end of the year didn't see much movement, remaining essentially flat at around $42,500.
As it stands, professional Bitcoin traders are hesitant to employ leverage. Predominantly opting for monthly contracts due to the lack of a varying funding rate, these instruments are typically seen trading 5%-10% above regular spot markets, justifying the longer settlement period. To understand these traders' positioning, the Bitcoin futures premium or the basis rate should be analysed.
When Bitcoin's price broke $48,000 on February 11, traders seemed to adopt a bullish stance, with the basis rate climbing above 10%. However, this movement doesn't mirror the premium seen early in 2024, implying that traders aren't using excessive leverage currently — a positive sign for market health.
By observing the balance between buy and sell options, one can discern whether Bitcoin's bullish momentum took traders by surprise. A rising demand for sell options normally suggests traders leaning towards neutral-to-bearish strategies.
Options activity in the Bitcoin market has remained rather stable in recent fortnights, with the sell-to-buy options volume averaging at 0.60. This suggests a 40% lower demand for sell options, indicating a bullish stance in absolute terms and a lack of increased demand for downturn protection.
All current Bitcoin derivatives indicators lean towards a moderate bullish outlook, with no evidence of a fear of missing out or reckless high leverage usage. Additionally, with a steady influx into spot Bitcoin ETFs, bears have little motivation to push down Bitcoin's price, setting the stage for potential gains above $52,000.
Investment decisions always carry an element of risk, and investors should carry out their own research before making any decisions. This article doesn’t provide investment advice or recommendations.
Published At
2/15/2024 11:45:00 PM
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