Bitcoin (BTC) price has finally broken out of its tight trading range after 12 days, surging by 12.7% in just 24 hours. The rally pushed the price to a peak of $57,380, the highest level in over two years, resulting in $313 million in leverage short liquidations. However, despite this bullish movement, professional traders in the Bitcoin derivatives market are not showing much enthusiasm. In fact, some have even chosen to use protective put options.
While professional traders may not be fully on board, spot Bitcoin exchange-traded funds (ETFs) are still accumulating coins at a rapid pace. In the past three working days alone, they have acquired a total of 18,331 Bitcoin, worth over $970 million. BlackRock holds more than $7 billion in Bitcoin, followed by Fidelity with $5 billion. This influx of institutional investment more than makes up for the outflow from Grayscale’s GBTC, which is losing popularity due to its high fees.
Bitcoin bears are finding satisfaction in the belief that the US economy is heading towards a recession, a sentiment shared by JPMorgan Chase CEO Jamie Dimon. During a conference in Miami, Dimon expressed his concern that the market is too confident about a soft landing. He noted that the US Federal Reserve is expected to start tapering soon, but he does not foresee a crisis similar to the one in 2008.
If Dimon’s predictions are correct and the Fed keeps interest rates high, it could have a negative impact on stock markets. Companies would face higher costs to refinance their debts, and investors would have fewer reasons to exit fixed-income positions. In such a scenario, traders are unlikely to continue accumulating Bitcoin as the fear of an economic recession grows. Despite Bitcoin’s scarcity and lack of correlation with the stock market, investors tend to seek shelter in US Treasuries during times of uncertainty. This perception still hinders the case for cryptocurrencies as a safe haven asset.
To gauge the sentiment of professional traders in the Bitcoin derivatives market, it is essential to analyze BTC monthly futures contracts. In neutral markets, these contracts typically trade at a premium of 5% to 10% to account for their longer settlement period. Currently, the annualized futures premium ranges between 13% and 18%, which is considered healthy and moderately bullish. Additionally, there is no indication of price surges driven by leverage, suggesting a lack of increased risk of liquidations.
Analyzing the Bitcoin options market also provides insights into traders’ strategies to hedge against potential price corrections. By comparing the demand for protective put options to call options, one can assess market sentiment. The recent rally has only seen a 15% reduction in demand for protective put options, indicating a relatively high level of confidence in Bitcoin’s price. In contrast, the previous week showed an average difference of 42% in favor of call options, suggesting greater uncertainty.
From a bullish perspective, it could be argued that professional traders were caught off guard by Bitcoin’s breakout above the $52,500 resistance level. On the other hand, bears can take comfort in knowing that whales and market makers remain skeptical of the recent rally. The path to $60,000 is still possible, but it may come as a surprise to most professional Bitcoin traders.
Disclaimer: This article is for informational purposes only and should not be interpreted as investment advice. The views expressed in this article are solely those of the author and do not necessarily represent the views of Cointelegraph.