Bitcoin derivatives metrics suggest $70K is here to stay

Bitcoin Derivatives Metrics Suggest $70K Is Here To Stay


Since March 25, Bitcoin (BTC) has struggled to hold its price above $71,000, a trend that some see as a sign of bearish momentum. However, insights from the BTC derivatives market indicate a more stable environment, as the previously widespread optimism has notably subsided.

Relentless US inflation strengthens the bull case for Bitcoin.

Currently, Bitcoin has found it challenging to hold the ground above the $70,000 limit. However, some analysts believe that recent U.S. inflation—which has shown unexpected resilience—and the unsustainable fiscal direction of the U.S. government create a favorable backdrop for investing in less-than-ideal assets.

Source: MatticusBTC

Market analyst Maticus has attributed the rise in BTC inflation to the massive monetary expansion orchestrated by the US Federal Reserve in the 2020-2021 period. As a result, the Federal Reserve may have no choice but to keep interest rates higher. However, this strategy has its limitations, especially given the interest burden on US government debt.

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Higher interest rates can cause problems for businesses and households, especially when refinancing or getting a new loan. This situation slows economic growth and reduces investors' appetite for riskier assets. However, in 2024, investors began to look for alternatives to keep their money away from US Treasury bonds.

Over the past 30 days, both gold and bitcoin have hit all-time highs, with US government 2-year notes falling to a nine-month low on April 9, a move that suggests a lack of investor appetite for a steady 4.7%. -Income production to prevent inflation.

The stock market may determine Bitcoin's performance in the near term.

Bitcoin critics suggest that the S&P 500 index's decline from its March 28 high could signal an impending recession. Given the strong correlation between Bitcoin and the stock market, which was over 80% last month, Bitcoin prices may fall early if stock market issues continue.

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S&P 500 futures and the 40-day correlation of the Bitcoin/USD index. Source: TradingView

Despite resistance at the $72,000 level, BTC futures and options markets are currently showing a neutral level. This stability is underlined by two key indicators, showing healthy consumer demand compared to the situation at the end of March. The risk of overuse is valid, especially with BTC futures in open demand of $34.3 billion.

Perpetual contracts, also known as reverse swaps, include an amount calculated every eight hours. A positive funding rate indicates increased demand for leveraged positions.

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Bitcoin Perpetual Futures 8-Hour Funding Rate. Source: Coinglass

The data shows funds were up 0.07% in the eight-hour period on March 31, which equates to a 1.5% annualized pace on a weekly basis. However, this indicator has been adjusted, the current rate is 0.3% per week. This reduces the pressure on traders and shows that using long positions is a fairer market dynamic and lays the foundation for leverage.

The balance between calls (buys) and demand should be analyzed to ensure that the decrease in demand for long positions is an accurate reflection of market sentiment. An increase in put option activity often reflects the market's neutral or bearish outlook.

Related: Bitcoin bounces back as Grayscale ETF exits hit new record low

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Derbibit BTC options call volume ratio. Source: Lavitas

Data from the past few weeks shows that options have consistently outperformed call options, with a significant 35% average volume difference. This indicates a low demand for bearish protection, which is an interesting trend considering Bitcoin's multiple tests of the $64,500 support level in early April.

While it is not certain that Bitcoin will surpass its all-time highs in the near future, the threat of a massive sell-off caused by excessive leverage appears to have abated. Therefore, without a major downturn in general economic conditions, it seems unlikely that Bitcoin will fall below $65,000.

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.

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