Bitcoin soared to a record-breaking high of $73,650 on March 13, marking a remarkable 44% increase in just 16 days. This surge in price can be attributed to the growing demand for spot Bitcoin exchange-traded funds (ETFs) listed in the United States, which saw a staggering $1 billion in net inflows on March 12. As a result, traders are now speculating whether Bitcoin has the potential to reach $80,000, especially as professional traders continue to add bullish leveraged positions.
One interesting perspective is that Bitcoin is being used as a hedge against U.S. monetary policy, particularly following the 3.2% rise 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 have fewer incentives to expand and hire.
On the other hand, if the pessimistic scenario unfolds and inflation accelerates, forcing the Fed to raise rates even further, this could prove detrimental for risk-on assets like Bitcoin. During uncertain times, 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.
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, and 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.
In the past two weeks alone, 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 are concerned about the excessive leverage on Bitcoin futures, which poses a looming risk of liquidations and subsequent price corrections.
On March 13, Bitcoin’s aggregate futures open interest reached its highest-ever level at $35 billion. Additionally, top traders at crypto exchanges have been initiating leveraged long positions. While this may indicate excessive confidence, it is important not to jump to conclusions about an impending crash in Bitcoin’s price.
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, institutional investors authorized by the issuer to create and redeem ETF shares, could be driving this increased demand for leverage due to the ETF inflow.
To verify whether professional traders are overly optimistic, one can analyze data from Bitcoin options markets. The 25% delta skew, which measures the overpricing of upside or downside protection by arbitrage desks and market makers, is a good indicator. If traders anticipate a drop in Bitcoin’s price, the skew metric will rise above 7%, while periods of excitement tend to have a negative 7% skew.
Currently, the 25% delta skew for Bitcoin options is hovering around optimistic levels, but 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. Therefore, the demand for Bitcoin futures does not necessarily imply reckless or heightened risks of cascading liquidation.
While there is no guarantee that Bitcoin will surpass $80,000 in the near future, BTC derivatives metrics indicate a sense of confidence among traders, as they are pricing similar risks for unexpected upward and downward movements.
It is important to note that this article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.