Bitcoin Futures Predict Surge Above $70K Despite Slow Momentum

Bitcoin futures and options indicators are holding steady even though BTC swiftly rejected the $63,500 level. 

Source: www.securities.io

On May 14, Bitcoin experienced a 3.3% drop, testing the $61,000 support level, which was promptly defended. This marked the second unsuccessful attempt within a week to surpass $63,500. Despite this less-than-ideal price action, Bitcoin bulls maintain confidence, as evidenced by BTC derivatives metrics. With the current Bitcoin price trend appearing bearish, some analysts believe there's still a strong possibility of revisiting prices above $70,000. A trader and analyst noted the resilience of the $60,500 support level but emphasized the necessity of a higher high, particularly a daily close above $67,000, to break the current bearish pattern. While this analysis doesn't rule out a potential price recovery, it does indicate a trend toward prices below $57,000 in May.

U.S. Inflation Data Is Exerting Short-Term Pressure On The Price Of Bitcoin

Investor disappointment on May 14 was partly fueled by the United States Producer Price Index (PPI) data for April, which revealed a 0.5% month-over-month increase. The market interpreted this uptick in wholesale inflationary pressure as a signal that the U.S. Federal Reserve (Fed) might prolong higher interest rates, impacting risk-on assets such as cryptocurrencies and growth stocks.

While some argue that inflation could be beneficial for Bitcoin due to its stringent monetary policy, initial phases of fear and uncertainty often prompt investors to turn to cash and short-term bonds. Yields on 2-year U.S. Treasury notes dropped to 4.84% on May 14 from 5.03% on May 1, indicating increased demand for these fixed-income instruments. Despite the apparent negative sentiment triggered by higher-than-expected inflation data, derivatives data did not reflect this, suggesting that investors may still be optimistic about Bitcoin's resilience amidst economic fluctuations.

Bitcoin Derivatives Remain Resilient While Lackluster BTC Price Action

To assess whether professional traders have turned more pessimistic about Bitcoin after its drop to $61,000, one should scrutinize BTC monthly futures contracts. In neutral markets, these contracts typically trade at a 5% to 10% premium relative to BTC spot markets to accommodate the longer settlement period. Data indicates that despite worsening macroeconomic conditions and Bitcoin's repeated failure to sustain prices above $63,500 over the past week, the annualized BTC futures premium remained largely unaffected. The current 8% premium falls within the neutral market range, providing a decent margin for negative surprises. Next, one should analyze the Bitcoin options market to gauge if there's an increased demand for hedges post the recent price correction. If market makers and whales anticipate a Bitcoin price drop, the BTC options skew metric will exceed 7%, while periods of enthusiasm often display a skew below -7%.

While a display of strength by Bitcoin bears, evidenced by the fact that the last daily close above $65,000 occurred three weeks ago on April 23, the bulls seem unfazed by the current stagnation. This stagnation seems to be primarily due to a temporary pivot by investors towards cash holdings. Should inflationary pressures in the U.S. continue, market participants might be compelled to seek alternative investments. Therefore, the potential for Bitcoin to reach $70,000 by 2024 remains plausible.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.