Bitcoin price breaks out of a tight range, hitting over $57,000, despite mixed sentiment among traders. Spot Bitcoin ETFs see inflows while concerns about economic recession linger.
Bitcoin (BTC) value has finally seen a breakthrough after a dozen days of trading in a narrow range of 5%, fluctuating between $50,430 and $52,970. Within a span of 24 hours, there was a remarkable 12.7% surge, peaking at $57,380, marking its highest level in over two years. This surge led to significant liquidations, with about $313 million in leverage short (sell) positions being closed. Despite this surge, Bitcoin derivatives metrics suggest that professional traders are not overly enthusiastic, with some opting for protective put options.
Concerns Rise as Spot Bitcoin ETF Inflows May Decrease Amid Recession Risk
Thankfully for bullish investors, spot Bitcoin exchange-traded funds (ETFs) are still accumulating coins at an impressive pace. Recent data suggests that in just the last three working days, these funds have gathered a total of 18,331 Bitcoin, valued at over $970 million. Notably, BlackRock holds over $7 billion worth of Bitcoin, followed by Fidelity at $5 billion. This accumulation trend compensates for the outflow from Grayscale’s GBTC, which is experiencing a decline due to its comparatively high 1.5% fees.
Bitcoin pessimists find solace in the growing concerns about a potential recession in the United States, a sentiment echoed by JPMorgan Chase CEO Jamie Dimon. During a conference in Miami on Feb. 26, Dimon expressed skepticism about the market's confidence in a soft landing. He noted the expectation of the Federal Reserve (Fed) starting to taper soon but emphasized that he does not foresee a scenario similar to the 2008 financial crisis.
If Dimon's assessment holds true and the Fed opts to keep interest rates high, contrary to market expectations, it could spell trouble for stock markets. Higher interest rates would mean increased costs for companies to refinance their debts, especially considering that the interest rate two years ago was around 1.5%. Additionally, investors may find fewer incentives to exit fixed-income positions, particularly with the current yield for 2-year U.S. Treasuries standing at 4.7%, higher than U.S. inflation expectations at 3%.
Such a scenario may not bode well for Bitcoin, as traders may hesitate to accumulate more amidst growing fears of an economic downturn. Despite Bitcoin's status as a scarce asset with little correlation to traditional markets, investors tend to seek refuge in U.S. Treasuries during times of uncertainty. Consequently, it becomes challenging to make a compelling case for cryptocurrencies as the market still perceives them as risky assets.
Bitcoin Derivatives Metrics Reflect Moderate Skepticism
Analysis of BTC monthly futures contracts reveals that in neutral markets, these instruments typically trade at a premium of 5% to 10% to accommodate their extended settlement period.
Recent data shows that the annualized BTC futures premium has consistently ranged between 13% and 18% over the past week, indicating a healthy and moderately bullish sentiment. Furthermore, there is no indication of price surges driven by leverage, suggesting a lack of heightened risk of cascading liquidations.
Bitcoin options markets provide additional insights into professional traders' sentiment. Monitoring the demand difference between call (buy) and put (sell) options can offer clues about market sentiment and potential hedging strategies.
Notably, from Feb. 20 to Feb. 26, demand for protective put options relative to call options only saw a modest 15% reduction. This contrasts with the preceding week, where the difference averaged 42%, indicating much higher confidence in Bitcoin's price trajectory.
From a bullish standpoint, the recent rally might have caught professional traders off guard as Bitcoin breached the $52,500 resistance level. However, skeptics would find reassurance in the cautious stance of whales and market makers, as reflected in derivatives metrics. While the path to $60,000 remains plausible, it may come as a surprise to many professional Bitcoin traders.
This article serves as general information and should not be construed as legal or investment advice. The views expressed herein are solely those of the author and do not necessarily reflect or represent the views of Cointelegraph.