Bitcoin has risen 6.5% since the low of $92,458 on December 23, but has failed to break through the resistance level of $98,000. After reaching a historical high of $108,275 on December 17 last year, the stock market corrected sharply by 14.5%, and traders have regained confidence.
Bitcoin derivatives maintain a neutral to bullish stance, indicating that significant price volatility has not notably affected market sentiment. This positioning 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 (call) options, Bitcoin put (sell) options are trading at a 2% discount, consistent with trends from the past two weeks. This metric typically exceeds 6% when whales and market makers anticipate a potential pullback, reflecting the premium on put options.
As the S&P 500 index erased its monthly decline on December 24, the recent recovery in traditional financial markets also propelled 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 are demanding higher returns to hold government debt.
The recent rise in U.S. Treasury yields typically reflects expectations of rising inflation or increasing government debt, which 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 through liquidity injections.
Amid economic uncertainty, Bitcoin faces stagnation concerns.
Due to investor concerns about the risks of a global economic stagnation, Bitcoin's upside potential remains limited. In this scenario, predicting the overall impact on stock and real estate assets is challenging. Currently, Bitcoin has a high correlation of 64% with the S&P 500 index.
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 real estate financing issues.
To assess market sentiment, analyzing the Bitcoin 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.
OKX's Bitcoin margin long-short ratio. Source: OKX
OKX's Bitcoin long to short margin ratio currently stands at 25 times, favoring long (buy) positions. Historically, excessive confidence drives this ratio above 40 times, while levels below 5 times are generally considered bearish.
Both Bitcoin derivatives and margin markets show bullish momentum, despite a record outflow of funds from BlackRock's iShares Bitcoin Trust ETF (IBIT) on December 24. Moreover, the resilience displayed when retesting the $92,458 level on December 23 has bolstered optimism about Bitcoin potentially reaching $105,000 or even higher.
