Demand for Bitcoin options remains balanced between bulls and bears, with differing viewpoints among whales. This article, titled “Despite 23% gains, Bitcoin options traders still not bullish,” is sourced from Cointelegraph and compiled, translated, and written by PANews.
Summary:
RSI and moving averages indicate Bitcoin is “severely overbought,” analysts warn investors to be cautious when entering the BTC market.
Background:
Bitcoin continues to surge as 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 unwilling to take a bullish position. Part of the reason is that the last time Bitcoin experienced a 5% weekly decline was five weeks ago, leading to a demand for downside protection.
Traders are concerned that inflows into Bitcoin spot ETFs may decrease, as well as a potential economic recession in the United States.
Despite Bitcoin spot ETFs consistently experiencing net inflows (PANews note: On March 1st, Bitcoin spot ETFs saw a total net outflow of $139 million, marking the first net outflow in seven trading days.), investors worry that the inflow of funds may decrease, which could trigger a price adjustment. This sentiment suggests that these traders either don’t believe in the current bull market or don’t see the need to use leverage in the face of macroeconomic uncertainty.
The US Bitcoin ETF had a net inflow of $673 million on February 28th alone, accumulating a total net inflow of $7.4 billion since its launch on January 11th. Bloomberg senior ETF analyst James Seyffart reported this data and emphasized that only 150 ETFs have managed assets exceeding $10 billion. It’s worth noting that according to ETF Institute co-founder Nate Geraci, BlackRock’s iShares Bitcoin ETF already has over $9 billion in assets.
There are two different interpretations of this data. Some believe that in the long run, this inflow of funds may not be sustainable either due to a decrease in demand caused by the rising price of Bitcoin or limited preference for risk positions in cryptocurrencies. On the other hand, from a bullish perspective, as some traders believe, the “snowball effect” may occur, meaning that the rise in the price of Bitcoin will “further stimulate” ETF sales.
Crypto trader Beanie expressed his viewpoint on the X social network, believing that BlackRock and other spot ETF issuers have the motivation to deploy their sales teams because of the “strong appeal of the Bitcoin narrative.” This means that there is still a considerable distance to go before the decrease in inflows. The post also highlighted the triggering factor of the Bitcoin halving, which is yet to occur, suggesting that it is still too early for ETF issuers to sell.
However, all these assumptions may become invalid if the economy experiences a severe recession or if investors are forced to liquidate profitable positions to pay for increased financing costs elsewhere. Economist David Rosenberg predicts an 85% likelihood of a US economic recession by 2024. He emphasizes that once the economy contracts, the stock market will “suffer significant losses.”
Bitcoin derivatives reflect the balance of demand between bulls and bears
Despite Bitcoin’s 45% increase in February, the Bitcoin options market must be explored to gauge professional traders’ level of unease towards Bitcoin. A 25% delta deviation can serve as a monitoring indicator, revealing when trading desks and market makers are charging excessive fees for upside or downside protection.
Bitcoin 2-month options 25% delta deviation
Since February 20th, the 25% delta for Bitcoin options has remained neutral, fluctuating between -7% and +7%. This indicates that the overall pricing between call (buy) and put (sell) options is balanced. Interestingly, traders became less optimistic just six days after Bitcoin failed to break the $52,500 mark. This reflects the anxious psychology of crypto investors in 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 provide downside protection at a lower price than the upside risk position. This indicator integrates positions from spot, perpetual, and quarterly futures contracts. The following chart provides a comprehensive view of the extent of bullish or bearish sentiment.
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 surpassed $53,000, the net long top positions gradually increased. This data contradicts the deviation data to some extent, but it may be due to forced liquidation of short top positions.
In addition, 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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