Bitcoin (BTC) achieved a historic milestone on March 13, reaching an all-time high of $73,650, marking a remarkable 44% increase in just 16 days. This surge can be attributed to the rising demand for spot Bitcoin exchange-traded funds (ETFs) listed in the United States, which witnessed an unprecedented $1 billion in net flows on March 12. Traders are now speculating whether Bitcoin can surpass the $80,000 mark, especially considering that professional traders are consistently adding bullish leveraged positions.
Many analysts argue that Bitcoin is being utilized as a hedge against the United States’ monetary policy, particularly in light of the 3.2% increase in the Consumer Price Index (CPI) in February compared to the previous year. This places pressure on the U.S. Federal Reserve (Fed) to refrain from further interest rate cuts, which could potentially lead to an economic recession as companies have fewer incentives to expand and hire.
However, if the pessimistic scenario unfolds, with inflation accelerating and the Fed being compelled to raise rates, this could prove detrimental to risk-on assets, including Bitcoin. During uncertain times, investors typically 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.
Therefore, whether Bitcoin’s current bull run has the potential 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. Prior to 2024, Bitcoin was not easily accessible to the majority of 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 concerns 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 its highest-ever level at $35 billion. Moreover, 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, providing a comprehensive view of these traders’ bullish or bearish sentiment.
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.
For example, arbitrage desks may be using futures markets to anticipate strong inflows into spot Bitcoin ETFs, creating a temporary buffer for demand. Authorized Participants (APs), institutional investors authorized by the issuer to create and redeem ETF shares, could be driving the increased demand for leverage, reflecting a temporary situation due to the ETF inflow.
To determine whether professional traders are excessively confident, one should also examine data from Bitcoin options markets. The 25% delta skew is a useful indicator when arbitrage desks and market makers overprice upside or downside protection. If traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, while periods of excitement tend to have a negative 7% skew.
Currently, the Bitcoin options’ 25% delta skew is hovering around optimistic levels, still within the negative 7% range. This suggests 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 implies that the demand for Bitcoin futures does not imply reckless or heightened risks of cascading liquidation.
While there are no guarantees 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 movements.
This article is intended for general information purposes and should not be considered legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.