Bitcoin (BTC) reached a record high of $73,650 on March 13, showing a 44% increase in just 16 days. This surge is a result of the growing demand for spot Bitcoin exchange-traded funds (ETFs) listed in the United States, which saw a record $1 billion in net flows on March 12. Traders are now speculating whether Bitcoin can reach $80,000, as professional traders continue to add bullish leveraged positions.
Many analysts believe that Bitcoin is being used as a hedge against U.S. monetary policy, especially after the 3.2% increase in the Consumer Price Index (CPI) in February compared to the previous year. This puts pressure on the U.S. Federal Reserve (Fed) to avoid further interest rate cuts, which increases the risk of an economic recession as companies have less incentive to expand and hire.
However, if the pessimistic scenario becomes a reality and inflation accelerates, forcing the Fed to raise rates, it could be detrimental to 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 can surpass $80,000 depends on the adoption of spot ETF instruments as a “store of value” and a potential change in the risk assessment of Bitcoin. Before 2024, Bitcoin was not easily accessible to most 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, 2024.
In the past two weeks, U.S.-listed spot Bitcoin ETF products have attracted nearly $5 billion in capital, establishing the industry as a top contender for institutional investment. However, some analysts are worried about the excessive leverage on Bitcoin futures, which could lead to 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 leverage longs (buy positions). The long-to-short indicator, which combines positions across spot, perpetual, and monthly futures contracts, provides 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, with the consolidated metric reaching its peak in 30 days. However, it is too early to conclude that the risk of a Bitcoin price crash has increased.
It is possible that arbitrage desks are 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, may be driving the increased demand for leverage.
To confirm whether professional traders are overly confident, one should also analyze data from Bitcoin options markets. The 25% delta skew, which indicates when arbitrage desks and market makers overprice upside or downside protection, can provide insights. Currently, the Bitcoin options’ 25% delta skew is hovering around optimistic levels within the negative 7% range. This suggests that excessive optimism is concentrated in futures markets and does not necessarily indicate reckless or heightened risks of cascading liquidation.
While there is no guarantee that Bitcoin will surpass $80,000 in the near term, BTC derivatives metrics show confidence, as traders are pricing similar risks for unexpected upward and downward movements.
It’s 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 the author’s alone and do not necessarily reflect the views of Cointelegraph.