The demand for Bitcoin options remains balanced between bulls and bears, but there is a divergence in opinions among whales. This article is sourced from Cointelegraph’s article titled “Despite 23% gains, Bitcoin options traders still not bullish,” compiled, translated, and written by PANews.
Summary:
RSI and moving averages indicate that Bitcoin is “severely overbought,” analysts advise caution when entering BTC now.
Background:
Bitcoin continues to surge, and the rebellious cryptocurrency industry launches a regulatory counterattack.
Bitcoin has risen 23% in the five days leading up to February 28th, but Bitcoin options traders are still not willing to take a bullish stance. One of the reasons is that the last time Bitcoin saw a 5% weekly decline was five weeks ago, which led to the demand for downside protection.
Traders are concerned that the inflow of funds into Bitcoin spot ETFs may decrease, along with the U.S. economic recession.
Despite Bitcoin spot ETFs consistently seeing net inflows (PANews note: On March 1st, Bitcoin spot ETF had a net outflow of $139 million, the first net outflow in seven trading days), investors worry that the inflow of funds may decrease, potentially triggering a price adjustment. This sentiment indicates that these traders either do not believe in the current bull market or do not see the need for leverage amid macroeconomic uncertainty.
The U.S. Bitcoin spot ETF had a net inflow of $673 million on February 28th, accumulating a total net inflow of $7.4 billion since its launch on January 11th. Bloomberg’s senior ETF analyst, James Seyffart, reported this data and emphasized that only 150 ETFs have managed assets exceeding $10 billion. It is worth noting that according to Nate Geraci, co-founder of the ETF Institute, BlackRock’s iShares Bitcoin ETF already has over $9 billion in assets.
There are two different interpretations of this data. Some believe that this influx of funds may not be sustainable in the long run, either due to a decrease in demand caused by rising Bitcoin prices or limited preference for risk exposure to cryptocurrency. Conversely, from a bullish perspective, as some traders believe, the “snowball effect” suggests that the rise in Bitcoin prices will “further stimulate” ETF sales.
Crypto trader Beanie expressed his views on X social network, believing that BlackRock and other spot ETF issuers have an incentive to deploy their sales teams because of the “strong appeal of the Bitcoin narrative.” This means that there is still a long way to go before the inflow of funds decreases. The post also emphasized the triggering factor of Bitcoin halving, which is not yet due, suggesting that it is too early for ETF issuers to sell.
However, all these assumptions may become invalid if there is a severe economic recession or if investors are forced to liquidate profitable positions to cover increased financing costs elsewhere. Economist David Rosenberg predicts an 85% likelihood of a U.S. economic recession in 2024. He emphasized that once the economy contracts, the stock market will “suffer huge losses.”
Bitcoin derivatives reflect the balance of demand between bulls and bears.
Despite Bitcoin’s 45% surge in February, the Bitcoin options market must be explored to measure professional traders’ level of concern about Bitcoin. A 25% delta skew can serve as a monitoring indicator, revealing when overpriced protection for upside or downside movements is being charged by trading desks and market makers.
Bitcoin options’ 25% delta skew
Since February 20th, the 25% delta of Bitcoin options has remained neutral, fluctuating between -7% and +7%. This indicates an overall balance in the pricing of call (buy) and put (sell) options. Interestingly, traders became less optimistic just six days after Bitcoin failed to break the $52,500 level. This reflects the anxious psychology of crypto investors during the accumulation phase.
It is necessary to cross-check the data from the Bitcoin futures market to evaluate the positions of top traders, regardless of whether market makers offer downside protection at a lower price than the risk position for upside movements. This indicator integrates positions from spot, perpetual, and quarterly futures contracts. The following chart provides a comprehensive view of the degree of bullishness or bearishness.
BTC long/short ratio of top traders on exchanges
Data shows that until February 26th, top traders on Binance and OKX remained relatively neutral. As Bitcoin broke $53,000, the net long positions of top traders gradually increased. This data is somewhat contradictory to the skew data of Bitcoin, but it may be due to forced liquidation of short positions.
Furthermore, the long/short ratio of OKX traders has not even reached its monthly high, making it difficult to assert that professional traders are currently bullish. Therefore, if the inflow of funds into spot ETFs continues, traders who currently hold a skeptical attitude may need to catch up.
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