Bitcoin faced a 13.3% drop in price between April 12 and April 13, causing traders to exit their positions, especially those who had used leverage. This movement led to $387 million in forced liquidations and a reduction of $5.4 billion in open interest. Initially, this price action and its impact on derivative markets seemed to indicate a decrease in risk appetite.
However, cryptocurrency traders are familiar with volatility and often overreact during uncertain times. Therefore, a closer examination is necessary to determine whether the retest of $61,500 was enough to instill fear or signal that the path to $72,000 and a potential all-time high after the Bitcoin halving is now less likely.
The recent drop in Bitcoin’s price has raised questions about its reliability as a store of value. Despite a modest recovery to $63,500 on April 15, overall trader sentiment has dampened, making it difficult to support the narrative of Bitcoin as “digital gold.” Additionally, the price movement revealed weaknesses in the spot Bitcoin ETF, as holders were unable to sell over the weekend. This highlighted the limitations of indirect exposure to Bitcoin through such instruments.
Recent inflows into spot ETFs in the U.S. have had a significant influence on Bitcoin’s price, even when accounting for outflows from Grayscale’s GBTC. The sector has accumulated $55 billion in assets under management over three months, driven by visits from sales teams at BlackRock, Fidelity, Bitwise, and VanEck to institutional clients and top asset managers.
Gold, on the other hand, remains unchallenged in its reputation as a store of value. It has maintained price stability during recent global political uncertainties and escalating conflicts in the Middle East. Currently trading at $2,350, it has held its level over the past week after reaching 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 factors such as excessive leverage could have impacted Bitcoin’s performance.
Historical data shows that the price actions of Bitcoin and gold are rarely synchronized, with a correlation metric ranging from -1 to +1. A score of 0 would represent a lack of any correlation between the two assets. This highlights the advantage of holding an asset like Bitcoin that does not have a direct relationship with traditional financial assets.
To assess professional traders’ sentiment towards Bitcoin, it is important to analyze BTC monthly futures contracts. In neutral markets, these contracts typically have a premium of 5% to 10%, reflecting 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 understand market sentiment, it is also crucial to examine the Bitcoin options skew metric. A skew metric exceeding 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 investors’ optimism.
It is important to note that 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 any decisions.