Bitcoin bears beware – BTC’s rally above $52K is healthier than ever.
Bitcoin (BTC) gained 21.2% between February 7 and February 15 as traders tried to establish support at $52,000. This week's rise is due to increased spot entry into Bitcoin exchange-traded fund (ETF) instruments and macroeconomic uncertainty. However, the parameters of Bitcoin derivatives do not match the excessive optimism seen in the market, which indicates that professional traders are not sure about the sustainability of the bullish momentum.
Bitcoin ETF earnings can be weighed down by weak macroeconomic data.
The $2.4 billion in net inflows into spot Bitcoin ETFs over the past 7 days may be due in part to early signs of a slowdown in the U.S. economy, particularly in the consumer sector. U.S. retail sales fell 0.8 percent in January from a month earlier, according to the Census Bureau. Similarly, Japan and the United Kingdom entered technical recession after experiencing two-quarters of their GDP decline.
Traders are questioning whether institutional demand for Bitcoin will continue, given that the latest economic data is not conducive to risk-averse markets. In times of uncertainty, investors often seek protection in fixed income assets. One should analyze the BTC derivatives markets starting with the perpetual contract funding rate to gauge the comfort of whales and arbitrage tables with Bitcoin at $52,000 support.
A positive funding ratio indicates increased leverage among long (buy) positions, while a negative ratio indicates increased leverage among shorts (sell).
Funding rates for Bitcoin perpetual contracts have remained relatively stable over the past week at 0.25% over 7 days, indicating balanced demand and a neutral market. In contrast, at the end of 2023, the benchmark stood at 1% at 7 days, indicating excessive optimism. Interestingly, the year-end bitcoin price remained essentially flat at $42,500 compared to the previous two weeks.
Bitcoin pro traders are currently not comfortable using leverage.
Due to the lack of variable funding rates, whalers and market makers typically prefer monthly contracts. This omission makes these instruments 5%-10% higher than conventional spot markets to ensure longer settlement times. Therefore, to determine the position of professional traders, one must analyze the Bitcoin future premium, also known as the base rate.
According to the data, after the Bitcoin price exceeded $48,000 on February 11, the base rate rose by more than 10%. However, this activity is not comparable to the premium seen in early 2024. This suggests that overleveraging will not be used to support the markets at this time, which is a healthy indicator.
One examines the balance between calls (buys) and puts (sells) to assess whether traders are surprised by Bitcoin's bullish activity. The increasing number of options often indicates that traders are focusing on neutral-to-carry pricing strategies.
Related: Bitcoin ETFs Make Up 75% of New Investments – CryptoQuant
Bitcoin options activity has remained relatively stable over the past two weeks, with call options volume averaging 0.60. This indicates that demand for put (sell) options was 40% lower. In addition to being downright bullish, the evidence suggests that no interest has increased to prevent a market crash.
All Bitcoin derivatives indicators point to moderate bullishness, with no signs of FOMO or the usual high leverage when traders are apathetic. Bears also have little incentive to suppress the price of Bitcoin, given the consistent inflows into Bitcoin ETFs into the space, paving the way for gains above $52,000.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
