Bitcoin Top Traders Enter Leverage Longs Near ATH – $80K Ahead?

Bitcoin reached a new record high of $73,650 on March 13, experiencing a 44% increase in just 16 days. This surge in value has been driven by the growing demand for Bitcoin exchange-traded funds (ETFs) in the United States, which saw a record $1 billion in net flows on March 12. With professional traders adding bullish leveraged positions, many are now wondering if Bitcoin can reach $80,000. Some analysts believe that Bitcoin is being used as a hedge against U.S. monetary policy, particularly in response to the 3.2% increase in the Consumer Price Index (CPI) in February. This puts pressure on the U.S. Federal Reserve (Fed) not to further cut interest rates, which increases the risk of an economic recession. A scenario where inflation accelerates and the Fed is forced to raise rates could be detrimental for risk-on assets like Bitcoin. During times of uncertainty, investors tend to seek refuge in U.S. Treasury and cash positions, even if they have long-term convictions in stocks or real estate. The adoption of spot ETF instruments as a ‘store of value’ and a potential shift in Bitcoin’s risk assessment will play a crucial role in determining if the current bull run can surpass $80,000. Before 2024, Bitcoin was not easily accessible to most mutual funds and wealth managers, largely due to regulatory uncertainty and its classification as a commodity. The approval of the U.S. spot Bitcoin ETF on January 11, 2024 changed this, and over the past two weeks, U.S.-listed spot Bitcoin ETF products have attracted nearly $5 billion in capital. This has solidified the industry as an attractive option for institutional investors. Despite this positive development, some analysts are concerned about the excessive leverage on Bitcoin futures and the potential risk of liquidations and subsequent price corrections. Bitcoin’s aggregate futures open interest reached a record high of $35 billion on March 13, and top traders at crypto exchanges have been initiating leverage long positions. Although data indicates an excessive amount of confidence, it is too early to conclude that there is an increased risk of a Bitcoin price crash. It is possible that arbitrage desks are using futures markets to anticipate strong inflows into spot Bitcoin ETFs, which could create a temporary buffer for demand. To further assess professional traders’ confidence, data from Bitcoin options markets can be analyzed. The 25% delta skew, which measures the overpricing of upside or downside protection, can provide insights. Currently, the Bitcoin options’ 25% delta skew remains within the negative 7% range, indicating moderate excitement. This suggests that the demand for Bitcoin futures does not imply reckless or heightened risks of cascading liquidation. While there are no guarantees that Bitcoin will reach $80,000 in the short term, BTC derivatives metrics indicate a sense of confidence as traders are pricing similar risks for unexpected upward and downward price movements.