Bitcoin reached a historic high of $73,650 on March 13, experiencing a 44% surge in just 16 days. This upward trend can be attributed to the growing demand for spot Bitcoin exchange-traded funds (ETFs) listed in the United States, which saw a record $1 billion in net inflows on March 12. Traders are now speculating whether Bitcoin can reach the $80,000 mark, especially since professional traders are actively adding bullish leveraged positions.
One interesting question that arises is whether Bitcoin is being utilized as a hedge against inflation. Some analysts argue that Bitcoin is being used as a safeguard against U.S. monetary policy, particularly following 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 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 continues to accelerate, forcing the Fed to raise interest rates, it could prove 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 hold strong long-term beliefs 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 the risk assessment of Bitcoin. Before January 11, 2024, Bitcoin was not easily accessible to most mutual funds and wealth managers. Regulatory uncertainties and its classification as a commodity were major concerns. However, the approval of the U.S. spot Bitcoin ETF has changed the game.
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 investments. Nevertheless, there are concerns among some analysts 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 an all-time high of $35 billion. Additionally, top traders at crypto exchanges have been initiating leveraged long positions. The long-to-short indicator, which consolidates positions across spot, perpetual, and monthly futures contracts, provides a comprehensive view of these traders’ bullish or bearish sentiment.
The data suggests that whales and market makers at Binance and OKX increased their net long positions between March 10 and 13. Furthermore, the consolidated metric reached its highest point in 30 days, potentially indicating excessive confidence. However, it is premature 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, institutional investors authorized by the issuer to create and redeem ETF shares, may account for the increased demand for leverage due to the ETF inflow.
To further confirm whether professional traders are overly confident, one can 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 valuable insights. Currently, the Bitcoin options’ 25% delta skew is hovering around optimistic levels but still within the negative 7% range. This suggests that excessive optimism is concentrated in futures markets, as put options trade at only a 6% discount compared to equivalent call options. Thus, 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.
It is important to note that this article is for general information purposes only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.