Bitcoin’s recent rally above $31,000 caught many off guard, encountering a sharp $165 million liquidation in short futures contracts. The rally has raised questions about the cryptocurrency’s strength to hold above $30,000 amid potential economic recession and central bank activity targeting capital demand. So, while some market participants expect bulls to hold onto this support level, others express concerns about external factors impacting Bitcoin’s outlook.
Inflation continues to be a significant concern in traditional markets, with the Bank of England recently raising interest rates by 50 basis points, followed by Norway and Switzerland. This development has led to the highest cost of capital in over a decade for the region. Federal Reserve Chair Jerome Powell commented that the process of bringing inflation back down to 2% still has a long way to go.
Despite market uncertainties, Bitcoin derivatives have shown modest improvement, with futures contract premiums jumping to 4.3% from 3.2% the previous week. Additionally, options markets indicate an improvement in investor optimism, reflected in the turnaround of the 25% delta skew metric exiting the “fear” mode and moving into a moderate “greed” sentiment with a negative 8% skew.
However, factors such as the ongoing legal battle between Binance and the U.S. Securities and Exchange Commission pose a risk for BTC futures contracts. As Binance holds the largest market share in spot and derivatives markets, their legal outcome could significantly impact the cryptocurrency sector. Furthermore, uncertainty around crypto regulations and the risks associated with an economic recession could dampen Bitcoin derivatives traders’ enthusiasm.
Despite these external risks, there appears to be no inherent driver to justify a sudden, sharp BTC price correction. This uncertainty provides bulls with just the right amount of optimism to maintain a positive momentum. Traders and investors are encouraged to closely monitor Bitcoin futures contract premiums and hedging costs using BTC options to effectively navigate the evolving market landscape.
Source: Cointelegraph
