Bitcoin soared to a record high of $73,650 on March 13, experiencing a remarkable 44% increase in just 16 days. This surge in value can be attributed to the growing demand for spot Bitcoin exchange-traded funds (ETFs) listed in the United States, which saw a record $1 billion in net inflows on March 12. Traders are now speculating whether Bitcoin can reach the $80,000 mark, fueled by the continued addition of bullish leveraged positions by professional traders.
One of the reasons behind Bitcoin’s popularity is its potential as a hedge against U.S. monetary policy. Analysts argue that Bitcoin is being used as a safeguard against inflation, especially in light of the 3.2% increase in the Consumer Price Index (CPI) in February compared to the previous year. This puts pressure on the U.S. Federal Reserve to avoid further interest rate cuts, which in turn increases the risk of an economic recession, as companies may be less inclined to expand and hire.
However, if the pessimistic scenario unfolds and inflation accelerates, leading the Fed to raise interest rates further, it could have a negative impact on risk-on assets, including Bitcoin. During times of uncertainty, investors tend to seek refuge in short-term U.S. Treasury and cash positions, even if they have strong long-term convictions in the stock market or real estate.
The success of Bitcoin’s current bull run and its potential to surpass $80,000 hinges on the adoption of spot ETF instruments as a “store of value” and a potential shift in Bitcoin’s risk assessment. Until 2024, Bitcoin was not easily accessible to the majority of mutual funds and wealth managers due to regulatory uncertainty and its classification as a commodity. However, this changed after the approval of the U.S. spot Bitcoin ETF on January 11.
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 investment. Nevertheless, some analysts express concerns about the excessive leverage on Bitcoin futures, which could lead to liquidations and subsequent price corrections.
On March 13, Bitcoin’s aggregate futures open interest reached its all-time high of $35 billion. Additionally, top traders at crypto exchanges have been initiating leveraged long positions, indicating a bullish sentiment. However, it is too early 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, who are institutional investors authorized by the ETF issuer to create and redeem ETF shares, may be driving the increased demand for leverage due to the ETF inflow.
To determine if professional traders are overly confident, one can examine data from Bitcoin options markets. The 25% delta skew, which measures the overpricing of upside or downside protection by arbitrage desks and market makers, can provide insight. Currently, the Bitcoin options’ 25% delta skew is hovering around optimistic levels but still within the negative 7% range. This suggests that excessive optimism is concentrated in futures markets, and there is no evidence of reckless or heightened risks of cascading liquidation.
While there are no guarantees that Bitcoin will surpass $80,000 in the near future, BTC derivatives metrics indicate confidence, as traders are pricing similar risks for unexpected upward and downward movements.
Disclaimer: This article is for general information purposes only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.