In a development, in the world of cryptocurrency Bitcoin has experienced a surge reaching a price of $52,214. This represents an increase of 21.2% from February 7 to February 15. The rise in value can be attributed to traders actively working towards establishing a support level at $52,000.
Interestingly this upward trend aligns with a inflow of $2.4 billion into spot Bitcoin exchange traded funds (ETFs) over the past week. It seems that this movement is in response to indicators suggesting a slowdown in the U.S. Economy within the consumer sector as shown by a 0.8% decline in U.S. Retail sales reported by the Census Bureau for January.
Moreover concerns about the situation have been raised with both Japan and the United Kingdom experiencing technical recessions due to two consecutive quarters of declining gross domestic product (GDP). These macroeconomic uncertainties have prompted questions about whether institutional demand for Bitcoin can be sustained, especially considering that fixed income assets tend to be favored during market periods.
Although there is optimism, in the spot market derivative metrics present a contrasting picture. Indicate that professional traders are adopting a more cautious approach.
The funding rate, for contracts in the Bitcoin market has been relatively stable at 0.25% per 7 days which suggests a demand and a neutral market outlook. This is quite different from the rate of 1% per 7 days that was observed in 2023 indicating an optimistic sentiment at that time.
Professional traders, including investors and market makers seem to be cautious about using leverage as indicated by their trading behavior in contracts. These contracts usually trade at a premium of around 5% 10% compared to spot markets.
This reflects the absence of a funding rate and justifies the longer settlement period. When Bitcoins price surpassed $48,000 on February 11 the premium for Bitcoin futures (also known as the basis rate) surged above 10%. However this premium is not as high as it was at the start of 2024 suggesting that there is now a approach to supporting the market without relying heavily on leverage.
The options market also supports this optimism with its put to call options volume ratio averaging at around 0.60 over the two weeks. This indicates a demand ( 40% less) for put (sell) options and suggests that there isn’t significant hedging, against potential market downturns.The market seems to have been prepared for Bitcoins momentum as there is a demand, for both call (buy) and put (sell) options.
Despite Bitcoins surge above $52,000 recently professional traders in the derivatives market appear to have a bullish sentiment. The steady inflow into spot Bitcoin ETFs in the face of macroeconomic indicators sets the stage, for possible gains.
