Bitcoin (BTC) reached a record high of $73,650 on March 13, experiencing a 44% increase in just 16 days. This surge can be attributed to the growing demand for spot Bitcoin exchange-traded funds (ETFs) listed in the U.S., which saw a remarkable $1 billion in net flows on March 12. Traders are now pondering whether Bitcoin can surpass the $80,000 mark, especially since professional traders are continuing to add bullish leveraged positions.
One argument put forth by analysts is that Bitcoin is being used as a hedge against U.S. monetary policy, particularly in light of the 3.2% rise in the Consumer Price Index (CPI) in February compared to the previous year. This puts pressure on the U.S. Federal Reserve (Fed) to refrain from further interest rate cuts, which increases the risk of an economic recession as companies have less incentive to expand and hire.
However, if the pessimistic scenario unfolds with accelerating inflation and the Fed being forced to raise rates, this could prove detrimental for risk-on assets like Bitcoin. During times of uncertainty, investors tend to seek refuge in short-term U.S. Treasury and cash positions, even if they have long-term convictions in the stock market or real estate.
Therefore, the potential for Bitcoin’s current bull run to surpass $80,000 depends on the adoption of spot ETF instruments as a ‘store of value’ and a potential shift in Bitcoin’s risk assessment. Before 2024, Bitcoin was not easily accessible to most mutual funds and wealth managers. Additionally, regulatory uncertainty and its classification as a commodity were major concerns. However, this changed after the approval of the U.S. spot Bitcoin ETF on January 11, 2024.
In the past two weeks, U.S.-listed spot Bitcoin ETF products have attracted nearly $5 billion in capital, solidifying the industry as a top contender for institutional capital. Nevertheless, some analysts express concern about the excessive leverage on Bitcoin futures, which poses a potential risk of liquidations and subsequent price corrections.
On March 13, Bitcoin’s aggregate futures open interest reached an all-time high of $35 billion. In addition, top traders at crypto exchanges continued to initiate leverage long positions. The long-to-short indicator consolidates positions across spot, perpetual, and monthly futures contracts, offering a comprehensive view of traders’ bullish or bearish sentiment.
The data suggests that whales and market makers at Binance and OKX increased their net long positions between March 10 and March 13. Furthermore, the consolidated metric reached its peak in 30 days, potentially indicating excessive confidence. However, it is premature to conclude that the risk of a Bitcoin price crash has increased.
It is possible that arbitrage desks are using futures markets to anticipate strong inflows into spot Bitcoin ETFs, creating a temporary buffer for demand. Authorized Participants (APs), who are institutional investors authorized by the issuer to create and redeem ETF shares, may be behind the increased demand for leverage. Therefore, the increased demand for Bitcoin futures could be a temporary situation due to the ETF inflow.
To confirm whether professional traders are excessively confident, one can analyze data from Bitcoin options markets. The 25% delta skew is an important indicator that reveals when arbitrage desks and market makers overprice upside or downside protection. A skew metric above 7% suggests that traders anticipate a Bitcoin price drop, while periods of excitement tend to have a negative 7% skew.
Currently, the Bitcoin options’ 25% delta skew is hovering around optimistic levels but still within the negative 7% range. This indicates that excessive optimism is primarily concentrated in futures markets, as put options trade at only a 6% discount compared to equivalent call options. This data suggests that the demand for Bitcoin futures does not imply reckless or heightened risks of cascading liquidation.
While there is no guarantee that Bitcoin will surpass $80,000 in the near term, BTC derivatives metrics indicate confidence, as traders are pricing similar risks for unexpected upward and downward moves.
Disclaimer: This article is for general information purposes and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily represent the views of Cointelegraph.