On Thursday, Bitcoin's estimated leverage ratio experienced a surge, indicating an increase in borrowing by traders, according to CryptoQuant analyst BQYoutube. This surge may be attributed to bullish sentiment or high-risk behavior with potential for liquidation if market trends reverse. The funding rate tracked by Coinglass has jumped over 115% since last Friday to 0.0124%, signaling high investor greed. However, the low trading volume in BTC's spot market suggests weak organic demand at its current price.
In addition, Bitcoin's futures & options open interest has climbed 9% since October 1 to $6.14 billion, adding similar risks. Analysts advise postponement of strong buying decisions until leverage usage and exchange reserves decrease.
Despite outperforming gold and TIPs since June, Bitcoin's unsuccessful attempt to surpass the $28,000 resistance resulted in a 4.9% correction on Thursday. This shift has led to a fear-driven market. Currently, Bitcoin's $520 billion market capitalization surpasses those of global payment processor Visa (NYSE:V) and Exxon Mobil (NYSE:XOM) but lags behind its November 2021 all-time high of $1.3 trillion.
The rising DXY index and the $4.2 trillion held by top companies have diminished Bitcoin's attractiveness as a hedge instrument amidst U.S.'s economic resilience. Derivatives metrics indicate declining demand from bulls with futures contract premium at its lowest since BlackRock (NYSE:BLK)'s spot ETF filing.
The Bitcoin options' 25% delta skew switched to "fear" mode amid concerns over SEC's delayed Bitcoin spot ETF decisions and exchanges' exposure to terrorist organizations. Protective put options are now trading at a 13% premium, suggesting less confidence among traders despite Bitcoin's predictable monetary policy and the S&P 500 index's 3% gain since June.
From a derivatives perspective, the likelihood of Bitcoin's price breaking above $28,000 in the short term appears slim. This situation underscores the current market volatility and the need for investors to tread with caution.
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