Bitcoin (BTC) saw a significant increase of 23% in the five days leading up to February 28th. However, BTC options traders are hesitant to take a bullish stance. This is partly due to the fact that it has been over five weeks since Bitcoin last experienced a 5% weekly loss, which has led to a demand for protection against potential downside risks.
Traders are concerned about the possibility of reduced inflows into spot Bitcoin exchange-traded funds (ETFs) and a potential recession in the United States. There are worries among investors that a decline in inflows into these ETFs could trigger a price correction. This indicates that these traders either lack confidence in the current bull market or do not see the need for leverage in the face of macroeconomic uncertainty.
On February 28th alone, U.S. Bitcoin ETFs saw a net inflow of $673 million, bringing the total net deposits since their launch on January 11th to $7.4 billion. Bloomberg’s senior ETF analyst, James Seyffart, reported this information, highlighting that only 150 ETFs have ever surpassed the $10 billion mark in assets under management. Notably, BlackRock’s iShares Bitcoin ETF already has over $9 billion in assets, according to Nate Geraci, co-founder of the ETF Institute.
Interpreting this data leads to two different perspectives. Some argue that these inflows may not be sustainable in the long run, either due to a decrease in demand as Bitcoin’s price rises or because there is a limit to the risk appetite for exposure to cryptocurrencies. On the other hand, from a bullish standpoint, some traders believe in a “snowball effect” where the increasing Bitcoin price further inspires ETF sales, as suggested by JP Morgan analysts.
Trader beaniemaxi shared their opinion on a social network, suggesting that both BlackRock and other spot ETF issuers have incentives to deploy their sales teams because the Bitcoin narrative is resonating with investors. This implies that there is still a significant distance to cover before the inflows begin to diminish. The post also highlights the Bitcoin halving trigger, indicating that ETF issuers have a compelling argument for selling.
However, all of these hypotheses could be disproven if the economy experiences a severe recession or if investors are forced to sell profitable positions to meet increased financing costs elsewhere. Economist David Rosenberg predicts an 85% likelihood of a U.S. economic recession in 2024 and emphasizes that the stock market would suffer greatly in the event of an economic contraction.
To gauge the sentiment of professional traders towards Bitcoin, despite its impressive 45% gains in February, one must look at the BTC options markets. The 25% delta skew is an informative indicator that reveals whether arbitrage desks and market makers are charging excessively for upside or downside protection.
The Bitcoin options 25% delta skew has remained neutral since February 20th, fluctuating between -7% and +7%. This suggests that call (buy) and put (sell) options are priced fairly. Interestingly, traders became less optimistic just six days after Bitcoin failed to surpass the $52,500 mark. This shows the anxiety among cryptocurrency investors during accumulation phases.
It is important to cross-check data from BTC futures markets to get a comprehensive view of how bullish or bearish top traders are. This indicator consolidates positions across spot, perpetual, and quarterly futures contracts.
The data indicates that top traders at Binance and OKX remained relatively neutral until February 26th, at which point they gradually increased their net long positions as Bitcoin’s price exceeded $53,000. This partially contradicts the Bitcoin skew data but could be attributed to the forced liquidation of short positions, indicating the sudden end of bearish bets.
Additionally, traders at OKX have not even reached their highest monthly level in long-to-short ratios, making it difficult to argue that professional traders are currently bullish. Therefore, if the influx of spot ETFs continues, it is likely that skeptical traders will need to catch up.
This article is for general information purposes only and should not be considered legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.