BTC derivatives data hints at rally to $105K

Bitcoin (BTC) has gained 6.5% since its $92,458 low on Dec. 23 but it failed to surpass the $98,000 resistance level. Traders showed renewed confidence after a steep 14.5% correction that followed the $108,275 all-time high on Dec. 17.

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Bitcoin derivatives maintained a neutral-to-bullish stance, suggesting that the sharp price volatility did not significantly impact market sentiment. This positioning supports the likelihood of a sustainable rally above $105,000.

The Bitcoin futures monthly contracts are trading at a robust 12% premium over the regular spot market. This indicates strong demand for leveraged long (buy) positions. Typically, premiums ranging from 5% to 10% are considered neutral, as sellers factor in the extended settlement period when setting prices.

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Bitcoin put (sell) options are trading at a 2% discount compared to equivalent call (buy) options, consistent with the trend over the past two weeks. When whales and market makers anticipate a potential correction, this indicator usually exceeds 6%, reflecting a premium on put options.

The recent recovery in traditional financial markets also contributed to Bitcoin’s rise above $98,000 as the S&P 500 index erased its monthly losses on Dec. 24. Additionally, the US 10-year Treasury yield climbed to 4.59%, up from 4.23% two weeks earlier, suggesting that investors are demanding higher returns to hold government debt.

The recent increase in US Treasury yields typically reflects expectations of higher inflation or rising government debt, which dilute the value of current bond holdings. In contrast, scarce assets like stocks and Bitcoin often perform well when central banks are compelled to stimulate the economy through liquidity injections.

Bitcoin faces stagnation fears amid economic uncertainty

Bitcoin’s upside remains constrained as investors worry about the risk of global economic stagnation. It is challenging to predict the full impact on stock markets and real estate assets under such conditions. Currently, Bitcoin’s correlation with the S&P 500 index is relatively high at 64%.

The US Federal Reserve has scaled back its rate-cut projections, now indicating only two interest rate cuts in 2025, compared to the four previously anticipated. This adjustment reduces the short-term risk of corporate earnings declines and potential issues in real estate financing.

To assess market sentiment, analyzing Bitcoin’s margin markets is essential. Unlike derivatives contracts, which require both buyers and sellers, margin markets allow traders to borrow stablecoins to purchase spot Bitcoin or borrow BTC to establish short positions, betting on a price drop.

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The Bitcoin long-to-short margin ratio at OKX is currently at 25x in favor of long (buy) positions. Historically, excessive confidence drives this ratio above 40x, while levels below 5x favoring longs are generally considered bearish.

Both Bitcoin derivatives and margin markets indicate bullish momentum, despite record outflows from BlackRock’s iShares Bitcoin Trust ETF (IBIT) on Dec. 24. Moreover, the resilience shown during the retest of the $92,458 level on Dec. 23 reinforces optimism about Bitcoin’s potential to reach $105,000 and beyond.