Bitcoin’s Soaring Journey: Is It a Miracle or Just a Fad? 🚀💰

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Key takeaways:

  • Spot Bitcoin ETF inflows and low leverage suggest the BTC rally has room to grow.

  • US Federal Reserve liquidity and weak bond sales support a Bitcoin push beyond $110,000.

Ah, Bitcoin (BTC), that elusive creature of the digital realm! It danced to a new all-time high of $109,827 on May 21, only to stumble like a clumsy ballerina on a slippery stage. Traders, with their furrowed brows, pondered whether the derivatives markets were the puppet masters behind this spectacle. Indeed, the $77 billion in Bitcoin futures open interest has played its part, but a closer inspection reveals a more optimistic horizon for price ascension.

Currently, the annualized Bitcoin futures premium sits at a modest 7%, comfortably nestled within the neutral range of 5% to 10%. This figure, like a shy child at a party, can leap to over 30% when optimism runs rampant. But fear not! The absence of excessive leverage means we can breathe a little easier, as the rally seems less like a house of cards ready to tumble.

Balanced order books and spot Bitcoin ETF inflows point to spot-driven rally

Let us reminisce about the previous Bitcoin high of $109,346 on January 20, when the annualized futures premium soared to 15%. Oh, the leveraged bullish positions were like a raucous crowd at a concert! But now, the Bitcoin derivatives market appears healthier, hinting at robust demand in the spot markets.

During the January bull run, Bitcoin’s price on Coinbase was like a diva, demanding a premium compared to other exchanges. But today, that so-called Coinbase premium has vanished, leaving us with a more balanced buying pressure—a sign of a market that’s finally grown up.

While excessive buying pressure on a single exchange isn’t necessarily a harbinger of doom, it can lead to unsustainable price surges when liquidity is as scarce as a unicorn. This data supports the notion that derivatives markets were not the main culprits behind the recent price hikes.

Moreover, the $1.37 billion in net inflows to spot Bitcoin exchange-traded funds (ETFs) in the United States between May 15 and May 20 suggests that spot buyers, rather than derivatives traders, were the true heroes of this rally.

Despite the lack of conviction in Bitcoin futures, several indicators point to further upside. Forced liquidations of bearish BTC futures positions were relatively low at $170 million between May 18 and May 21, solidifying the idea of a spot-driven rally. In contrast, the rally to $104,000 on May 9 triggered a staggering $538 million in liquidations over three days. Talk about a rollercoaster ride!

On May 21, Bitcoin options markets showed a slight uptick in demand for put (sell) options, but nothing to write home about. For comparison, the put-to-call ratio at Deribit plummeted to 0.4x during the previous bull run on January 20, reflecting a lack of confidence due to dwindling volumes in call (buy) options.

Bitcoin’s ascent may be tethered by macroeconomic factors, especially as the tariff war rages on. Yet, the potential for the price to reach $110,000 and beyond is partly rooted in the precarious position of the US Federal Reserve. Injecting liquidity could soothe recession fears, but it also diminishes the allure of government bonds, favoring risk-on assets like our beloved Bitcoin.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of CryptoMoon.

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2025-05-21 23:09