After 12 days of trading in a narrow 5% range, ranging from $50,430 to $52,970, the price of bitcoin eventually broke higher. At $57,380, the highest level in more than two years, the 12.7% surge in a single day culminated in substantial leverage short (sell) liquidations of $313 million. But according to Bitcoin derivatives data, professional traders aren’t all that excited about it; some have even chosen protective put options.
Spot Bitcoin ETF inflows may decline as the likelihood of a recession rises
Bulls are fortunate because spot Bitcoin exchange-traded funds (ETFs) are still amassing coins at a remarkable clip. As to a post by @HODL15Capital on the X social network, they had accumulated 18,331 Bitcoin worth nearly $970 million in just the last three working days. With holdings of over $7 billion, BlackRock has surpassed Fidelity, which is second with $5 billion. This has more than offset the withdrawal from Grayscale’s GBTC, which is declining because of its 1.5% fees, which are significantly higher than those of the competitors.
According to Jamie Dimon, CEO of JPMorgan Chase, bearish of bitcoin are comforted by the notion that the US economy is about to enter a recession. According to CNBC, Dimon stated at a conference in Miami on February 26 that the market is overconfident about a soft landing. Although the CEO of JPMorgan noted that the Federal Reserve of the United States (Fed) is anticipated to start tapering shortly, Dimon does not expect parallels to the financial crisis of 2008.
Stock markets would suffer if Jamie Dimon is right and there is a greater chance than the market believes that the Fed will maintain high interest rates. First of all, since the interest rate was only about 1.5% two years ago, businesses would have to pay more to renew their loan. More significantly, investors would have less motivation to sell fixed-income investments because the current yield on 2-year US Treasury bonds is 4.7%, which is greater than the 3% inflation estimate for the US.
A situation like this isn’t very optimistic for Bitcoin because traders won’t be inclined to keep adding if they start to fear an impending recession. Even though Bitcoin is rare and has little relationship to the stock market, investors frequently run to U.S. Treasuries when things get dicey. Because the market still views cryptocurrencies as risky investments, it is difficult to make a case in favor of them.
Metrics for Bitcoin derivatives indicate a fair amount of doubt
One should start their investigation with BTC monthly futures contracts in order to have an understanding of how professional traders are slanting toward Bitcoin derivatives. These products usually trade at a premium of 5% to 10% in neutral markets because of their longer settlement duration.
3-month Bitcoin futures with an annualized premium. Laevitas.ch is the source.
The annualized Bitcoin futures premium has been steadily between 13% and 18% for the previous week, according to data, which is seen as healthy and somewhat bullish. Moreover, there is no evidence of leverage-driven price spikes, indicating a lower likelihood of cascading liquidations.
In order to determine whether the recent increase has triggered tactics intended to hedge against a future price decline, traders can also examine the Bitcoin options markets. Monitoring the demand differential between call (buy) and put (sell) options is one way to combat this.
Notably, demand for protective put options decreased by just 15% compared to call options between February 20 and February 26. The previous week, however, revealed an average difference of 42% compared to call options, demonstrating far greater confidence in the price of Bitcoin.
From a bullish standpoint, one might contend that when Bitcoin broke above the $52,500 resistance, experienced traders were taken by surprise. Bears would also take comfort in the fact that, based on derivatives indicators, market makers and whales are still dubious of the current rally. Is there still a way to reach $60,000? Undoubtedly, but most seasoned Bitcoin traders would find that surprising.
