Source: Cointelegraph
Original: “Bitcoin Traders' Evolving View of BTC's Role in Every Portfolio Bolsters $100K Support”
Key Points:
Bitcoin has struggled to break through $105,000 since May 10, leading traders to question whether the bullish momentum has faded. Although BTC successfully reclaimed the $104,000 level, the demand for leveraged long positions has sharply declined, as indicated by the drop in Bitcoin futures premiums.
On May 14, the annualized premium for Bitcoin futures peaked at 7%, but then fell to 5%, approaching the neutral to bearish threshold, which is comparable to the level when BTC was trading around $84,500 four weeks ago.
The decline in demand for leveraged long positions seems to be related to broader macroeconomic uncertainties, as Bitcoin's price has closely followed the fluctuations of the stock market.
On May 15, S&P 500 futures reversed early morning weakness, while Bitcoin rebounded from $101,800 to $104,000. Investors appear to be more confident that the U.S. Treasury will be forced to inject liquidity after Federal Reserve Chairman Jerome Powell warned that "supply shocks" could keep interest rates higher for longer than expected.
Signs of economic weakness have also emerged. The U.S. Bureau of Labor Statistics reported that the Producer Price Index fell 0.5% in April, while economists surveyed by FactSet had expected a 0.2% increase. According to Reuters, limited risk appetite among investors is also affected by ongoing global trade tensions, as the U.S.-China tariff agreement is merely a temporary solution.
Increased demand for fixed income has seen the yield on the 10-year U.S. Treasury bond drop to 4.45% after reaching 4.55% on May 14, reversing the trend from the previous week. Historically, when government bond yields rise, Bitcoin tends to perform better, as this indicates a loss of confidence in the Treasury's ability to manage debt.
To assess whether traders are merely avoiding leverage or actively betting on price declines, analyzing Bitcoin options demand is helpful. Typically, during bearish sentiment periods, the BTC delta skew indicator rises above the neutral 6% threshold.
Contrary to expectations, Bitcoin put (sell) options are trading at a discount compared to call (buy) options, showing strong confidence in the $100,000 support level. However, the optimism seen on May 14 has faded, and the indicator is now at neutral -4%.
Given Bitcoin's price is closely related to the U.S. stock market, the likelihood of breaking through $105,000 largely depends on macroeconomic developments, such as trends in the U.S. Federal Reserve's balance sheet and recession risks. Notably, the high correlation between Bitcoin and the S&P 500 rarely lasts more than two months.
On May 14, U.S. Bitcoin exchange-traded funds (ETFs) saw a net inflow of $320 million, indicating sustained institutional demand. This suggests that investors are gradually shifting their view of Bitcoin from a risk asset to a non-correlated tool, which may reduce the likelihood of a sharp price correction, even in the absence of strong leveraged long positions.
Related: Arthur Hayes: Bitcoin (BTC) Will Reach $1 Million by 2028, Europe Should “Take the Money Out” Now
This article is for general informational purposes only and should not be considered or construed as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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