Bitcoin surges with options pointing towards $US80,000
At the heart of this frenzy for the largest crypto token lies seemingly insatiable demand from US-listed bitcoin ETFs, which began trading on January 11. Bitcoin has jumped about 186 per cent in the last 12 months.
Net inflows of $US7.35 billion have been invested since the debut of US bitcoin ETFs from some of the biggest fund names, including BlackRock and Fidelity Investments.
Even outsize outflows at one notable firm – nearly $US9 billion at Grayscale Bitcoin Trust since the ETFs were listed – haven’t swayed traders.
There were net outflows of about $US140 million on Friday, with GBTC seeing around $US490 million pulled from the fund.
“Given the low liquidity over the weekend, markets are moving north in anticipation that tonight’s ETF inflows will continue and prices will continue to rally,” said Hayden Hughes, co-founder of social-trading platform Alpha Impact.
Traders are betting on the price to soon cross the record of almost $US69,000, reached during the COVID-19 pandemic in November 2021, given the ETFs’ strong demand and concern of missing out ahead of bitcoin halving, which is expected in April this year.
After the halving – when the reward for mining is cut in half – the supply growth of the coin could come down, adding to the demand squeeze.
Other tokens known as altcoins, including Cardano and Polkadot, also were up on Monday – 7.4 per cent and 10 per cent, respectively.
Memes rise
Small-cap tokens, known as meme coins, also rose on the back of bitcoin’s rally. Dogecoin was up nearly 20 per cent and Shiba Inu 34 per cent in the past 24 hours.
“This is a situation reminiscent of the 2021 bull run, with retail traders looking to make quick profits from rising prices in very volatile tokens,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.
Trading in crypto derivatives, which reflects traders’ positions, also signalled a bullish outlook. Open interest at Chicago-based CME Group’s bitcoin and Ether futures market is just 1.8 per cent away from their respective record highs. The increase in the number of outstanding contracts is a sign of greater interest in crypto-related exposure and hedging among US institutions.
“The all-time highs in bitcoin should get tested in the short-term, with the important 70,000 level providing strong resistance,” Mauron said.
The big bets in the bitcoin options market come as leverage in crypto trading springs back to a level that was seen in the last bull market, with key metrics across different derivatives hitting highs. Bitcoin perpetual futures, the most common derivative to make leveraged bets on the digital asset, are seeing heavy inflows as well.
Perpetual swaps funding rates are extremely high, with annualised rates rising to 50-70 per cent over the weekend, according to Baeza. The futures basis on bitcoin is also extremely high, especially in the shorter maturities. The one-month basis is about 30 per cent, two-month about 25 per cent, and four-month about 22 per cent, he said.
Bloomberg
