Bitcoin’s price dropped by 13.3% between April 12 and April 13, causing traders to exit the market, especially those who had leveraged their positions. This movement resulted in $387 million in forced liquidations and a $5.4 billion reduction in open interest. Initially, this price action and its impact on the derivatives market suggested a decrease in risk appetite. However, cryptocurrency traders are accustomed to volatility and tend to overreact during uncertain times. Therefore, a closer examination is needed to determine whether the retest of $61,500 instilled fear or signaled a lower probability of reaching $72,000 and a potential all-time high after the Bitcoin halving.
The recent drop in Bitcoin’s price has dampened overall sentiment among traders, making it challenging to support the narrative of Bitcoin as “digital gold.” Furthermore, the price movement revealed weaknesses in the spot Bitcoin ETF, as holders were unable to sell over the weekend. This situation highlighted the limitations of indirect exposure to Bitcoin through such instruments.
The inflows into spot ETFs in the U.S. have significantly influenced Bitcoin’s price, even when accounting for outflows from Grayscale’s GBTC. The sector has amassed $55 billion in assets under management in the past three months, thanks to high-profile visits from sales teams at BlackRock, Fidelity, Bitwise, and VanEck to institutional clients and top asset managers.
Despite recent global political uncertainties and escalating conflicts in the Middle East, gold’s reputation as a store of value remains unchallenged, with its price remaining stable at $2,350. It reached an all-time high of $2,432 on April 12.
Analyst Tom Linn suggests that recent price movements confirm that investors do not view Bitcoin as a safe haven, unlike gold, which appreciated following news of military conflicts on April 12. However, this analysis may overlook the fact that gold markets do not operate over the weekend, and other dynamics, such as excessive leverage, could have affected Bitcoin’s performance.
Historical data shows that Bitcoin and gold price actions are rarely synchronized. The correlation metric ranges from -1 to +1, with -1 indicating opposite movements and +1 indicating perfect and symmetrical movements. A score of 0 represents a lack of correlation between the two assets.
This data indicates that Bitcoin is not correlated with gold, contradicting claims that it has failed as a store of value. This highlights the advantage of owning an asset that is not directly tied to traditional financial assets.
To determine if professional traders have become more pessimistic about Bitcoin, it is important to analyze BTC monthly futures contracts. In neutral markets, these contracts typically have a premium of 5% to 10% to account for the longer settlement period. The data shows that the annualized premium for BTC futures was largely unaffected by the recent price correction to $61,500, remaining above the 10% neutral-to-bullish threshold.
To fully assess market sentiment, it is also crucial to examine the Bitcoin options skew metric. A skew metric above 7% indicates expectations of a price decline, while a skew below 7% suggests bullish sentiment. Over the past two weeks, the BTC options 25% delta skew has remained within a neutral range, indicating a balanced demand for bullish and bearish strategies. Furthermore, there was no evidence of panic when Bitcoin tested the $61,500 support on April 13. Overall, the market data does not indicate any significant concerns or a decrease in investor optimism.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.