Bitcoin’s Weekend Surge Loses Momentum Below $64K Professional Traders Adopt Neutral Stances

Professional Bitcoin traders have not yet fully embraced the recent rally. 

Source:pintu.co.id

On August 23, Bitcoin surged 6.2%, reaching levels not seen in three weeks and holding steady around the $63,000 support level. Despite this positive momentum, BTC derivatives traders remain cautious and seemingly unconvinced about the long-term sustainability of this trend.

Bitcoin’s Correlation With The Stock Market Remains Stable

Market participants attribute the current behavior of the crypto market primarily to macroeconomic factors, with many waiting for the Federal Reserve’s September interest rate decision.

The Russell 2000 small-cap stock index is trading just 2% below its all-time high from July 2024, suggesting that traders are not overly risk-averse. Meanwhile, gold, traditionally seen as a safe-haven asset, is only 0.6% shy of its peak. Additionally, the yield on the US Treasury 2-year note is approaching its lowest point since May 2023, indicating that buyers are becoming more aggressive, accepting lower returns.

This mixed environment, with investors seeking safety while still optimistic about second-quarter corporate earnings, poses challenges for Bitcoin. Despite this, Bitcoin’s correlation with equities is not consistently high and has historically fluctuated, rarely maintaining a strong correlation for more than five months. Increased geopolitical tensions, such as recent conflicts between Israel and Hezbollah and disruptions in Libya’s oil production, have further heightened investor uncertainty and reduced risk appetite.

Bitcoin Derivatives Have Remained Stagnant But This Isn’t Necessarily A Bearish Signal

To gauge how Bitcoin traders are currently positioned, it’s important to examine the BTC futures premium. In a neutral market, investors typically expect a 5% to 10% annualized premium for the longer settlement periods of monthly contracts. A premium falling below this range is often seen as a bearish indicator, while periods of heightened enthusiasm can push it above 20%. Despite recent improvements in Bitcoin’s price, the BTC futures premium has stabilized around 6%. This suggests that, although some may view this as a sign of a healthy recovery driven by spot market activity, professional traders remain wary of opening leveraged long positions. On the other hand, bullish traders might see this as an indication that there is still ample dry powder available, which could be a positive sign if Bitcoin continues to perform well.

To further understand this cautious sentiment, it’s also essential to look at the BTC options market. Typically, if market makers and large traders anticipate a decline in Bitcoin’s price, the options skew metric will exceed 7%. In contrast, during optimistic periods, the skew tends to drop below 7%. Currently, the BTC options skew is around 0%, unchanged from the previous week, indicating a balance between call buy and put sell options. This balanced skew, similar to the futures market, suggests that options traders are not confident that a bull market is underway. In essence, traders seem doubtful that a rally above $67,000 is imminent.

Despite rising optimism in traditional financial markets about potential US interest rate cuts following Federal Reserve Chair Jerome Powell’s August 23 speech, uncertainty lingers over corporate earnings. Major companies such as Nvidia, Best Buy, and Salesforce are set to report earnings on August 28, and the US Personal Consumption Expenditures PCE inflation index, due on August 30, could significantly impact market sentiment. Consequently, it is prudent for investors to adopt a cautious, wait-and-see approach rather than making aggressive bullish bets at this time.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.