Bitcoin has risen 6.5% since its low of $92,458 on December 23, but has failed to break through the resistance level of $98,000. After hitting an all-time high of $108,275 on December 17 last year, the stock market significantly corrected by 14.5%, and traders have regained confidence.
Bitcoin derivatives maintain a neutral to bullish stance, indicating that significant price fluctuations have not notably affected market sentiment. This position supports the possibility of gold prices continuing to rise above $105,000.
Bitcoin 2-month futures annualized premium. Source: Laevitas.ch
The trading price of Bitcoin futures monthly contracts is 12% higher than the conventional spot market. This indicates strong demand for leveraged long (buy) positions. Typically, a premium of 5% to 10% is considered neutral, as sellers factor in the extended settlement period when pricing.
Bitcoin 1-month options 25% Delta skew (put options). Source: Laevitas.ch
Compared to equivalent bullish (buy) options, Bitcoin bearish (sell) options are trading at a 2% discount, consistent with trends from the past two weeks. This indicator typically exceeds 6% when whales and market makers anticipate a potential pullback, reflecting a premium for put options.
As the S&P 500 index eliminated its monthly losses from December 24, the recent recovery in traditional financial markets has also pushed Bitcoin above $98,000. Additionally, the yield on the 10-year U.S. Treasury bond rose from 4.23% two weeks ago to 4.59%, indicating that investors demand higher returns for holding government debt.
The recent rise in U.S. Treasury yields generally reflects expectations of rising inflation or increasing government debt, which can dilute the value of currently held bonds. In contrast, scarce assets like stocks and Bitcoin tend to perform well when central banks are forced to stimulate the economy by injecting liquidity.
Amid economic uncertainty, Bitcoin faces concerns of stagnation.
Due to investor concerns about the risks of global economic stagnation, Bitcoin's upside potential remains limited. In this scenario, predicting the overall impact on the stock and real estate markets is challenging. Currently, Bitcoin has a high correlation with the S&P 500 index at 64%.
The Federal Reserve has reduced interest rate cut expectations, currently indicating only two cuts in 2025, down from four previously expected. This adjustment lowers the short-term risks of declining corporate profits and potential issues with real estate financing.
To assess market sentiment, analyzing Bitcoin's margin market is crucial. Unlike derivatives contracts that require buyers and sellers, the margin market allows traders to borrow stablecoins to purchase spot Bitcoin or borrow Bitcoin to establish short positions, betting on price declines.
The Bitcoin margin long-short ratio from OKX. Source: OKX
The Bitcoin long to short margin ratio at OKX is currently 25 times, favoring long (buy) positions. Historically, excessive confidence pushes this ratio above 40 times, while levels below 5 times are generally considered bearish.
Both the Bitcoin derivatives and margin markets show bullish momentum, despite record outflows from BlackRock's iShares Bitcoin Trust ETF (IBIT) on December 24. Furthermore, the resilience shown when retesting the $92,458 level on December 23 has strengthened optimism regarding Bitcoin's potential to reach $105,000 or even higher.
