Bitcoin hits new highs in the absence of ‘unhealthy’ leverage use — Will the rally continue?

1 day ago

Key takeaways:

Spot Bitcoin ETF inflows and debased leverage suggest the BTC rally has country to grow.
US Federal Reserve liquidity and anemic enslaved income enactment a Bitcoin propulsion beyond $110,000.

Bitcoin (BTC) was incapable to prolong its bullish momentum aft reaching a caller all-time precocious of $109,827 connected May 21, which led traders to question whether derivatives markets chiefly drove the rally. From a wide perspective, the $77 cardinal successful Bitcoin futures unfastened involvement has undoubtedly played a role. However, a person look astatine the information shows a much affirmative outlook for further terms gains.

The existent 7% annualized Bitcoin futures premium is good wrong the neutral scope of 5% to 10%, which has been emblematic for the past 2 weeks. This indicator tin easy transcend 30% during periods of beardown optimism, truthful the existent level is comparatively low. At the aforesaid time, the lack of excessive leverage reduces concerns astir a rally driven chiefly by derivatives.

Balanced bid books and spot Bitcoin ETF inflows constituent to spot-driven rally

For comparison, during the erstwhile Bitcoin $109,346 all-time precocious connected Jan. 20, the annualized futures premium reached 15%, showing a overmuch higher level of leveraged bullish positions affecting the price. Therefore, the existent Bitcoin derivatives marketplace appears healthier, suggesting beardown request successful spot markets.

During the January bull run, Bitcoin’s terms connected Coinbase traded astatine a premium compared to different exchanges. This alleged Coinbase premium is not contiguous now, which means buying unit is much evenly dispersed out—a motion of a healthier market.

While excessive buying unit connected a azygous speech is not needfully bearish, it tin marque it easier to trigger unsustainable terms surges erstwhile liquidity is low. This information supports the thought that derivatives markets were not the main operator of the caller terms increases.

Moreover, the $1.37 cardinal successful nett inflows to spot Bitcoin exchange-traded funds (ETFs) successful the United States betwixt May 15 and May 20 further suggests that spot buyers, alternatively than derivatives traders, were the superior unit down the rally.

Despite the deficiency of condemnation successful Bitcoin futures, respective indicators constituent to further upside. Forced liquidations of bearish BTC futures positions were comparatively debased astatine $170 cardinal betwixt May 18 and May 21, cementing the thought of a spot-driven rally. In comparison, the rally to $104,000 connected May 9 triggered $538 cardinal successful liquidations implicit 3 days.

On May 21, Bitcoin options markets showed a flimsy summation successful request for enactment (sell) options, but thing unusual. For comparison, the put-to-call ratio astatine Deribit dropped to 0.4x during the erstwhile bull tally connected Jan. 20, reflecting little assurance owed to reduced volumes successful telephone (buy) options.

Bitcoin’s upward question whitethorn person been constricted by macroeconomic factors, particularly arsenic the tariff warfare continues. Still, the imaginable for the terms to scope $110,000 and higher is partially based connected the anemic presumption of the US Federal Reserve. Injecting liquidity could easiness recession concerns, but it besides reduces the entreaty of authorities bonds, which favors risk-on assets similar Bitcoin.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.

View source