Bitcoin (BTC) underwent a significant price correction of 14%, dropping to $59,300 after reaching its all-time high of $69,150 on March 5. Now, the challenge lies in reclaiming the $64,000 support level. Despite the short-term volatility, professional traders in BTC derivatives maintain a slightly bullish stance.
Interestingly, Bitcoin’s correction coincided with a 2.6% retracement in the tech-heavy Nasdaq-100 index futures, which had reached an all-time high of 18,377 on March 4. This retracement was sparked by a consumer research firm’s estimation that Apple iPhone sales in China had declined by 24%. Additionally, New York Community Bancorp (NYCB) saw its shares continue to decline after replacing its CEO due to “material weaknesses” in internal controls. In response, investors sought refuge in gold, causing the precious metal to gain 4.2% in just four days and trade near its all-time high.
Bitcoin’s new all-time high has attracted media attention, potentially leading whales to consider shorting the cryptocurrency or encouraging holders to reduce their positions due to criticism from Bitcoin skeptics. However, attributing the price correction solely to the funding rate on Bitcoin perpetual contracts is not entirely accurate. The funding rate can stay above 1% per week for an extended period without forcing bulls to close their positions. Some traders lack access to traditional funding, while others are not concerned about fees given the favorable market conditions.
It is also important to note that retail traders should not be seen as a proxy for overheated markets as cryptocurrency investors naturally exhibit a bullish trend. In contrast, professional traders prefer monthly future contracts to avoid variable funding rate costs. These contracts trade at a premium of 5% to 10% in neutral markets to account for their extended settlement period.
Data shows that the BTC futures premium stood at 15% throughout the $5,765 price move on March 5. This indicates that whales and market makers remain bullish despite the correction and suggests little difference in support levels at $62,000 or $64,000. Moreover, the BTC futures premium did not exceed 20% even during the all-time high, signaling cautious bullish sentiment among traders.
To further understand market sentiment, one should analyze Bitcoin options metrics. The 25% delta skew, which measures the excessive charges for upside or downside protection by arbitrage desks and market makers, currently stands at -7%. This places it between neutral and bullish markets. The last time option traders were overly excited was on Feb. 19, when the indicator reached -12%. Hence, the options market supports the notion that professional traders are skeptical about Bitcoin breaking above $70,000 in the near future.
During times of uncertainty, investors typically seek refuge in short-term bonds and cash positions. This rationalizes the absence of excessive optimism as Bitcoin reaches an all-time high. However, this time may be different, considering that the spot Bitcoin exchange-traded fund (ETF) inflow has attracted some capital from gold. This suggests that BTC’s price could sustain bullish momentum regardless of how traditional markets perform.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and assessment of risks before making any investment or trading decisions.