Interest in Bitcoin has risen in the wake of Coinbase’s listing on the Nasdaq exchange. The sentiment toward Bitcoin increased, pushing its price to a new all-time high of over $64,000, and investors are hedging against the upcoming volatility of the new digital gold.
Bitcoin has struggled to break its previous resistance of $60,000 in the past couple of weeks; however, investors are becoming more confident that BTC will continue to reach new highs. Data indicates December 31 call options of $100,000 and up to $300,000 are becoming increasingly attractive for investors, signaling a bullish path ahead.
Bitcoin’s Upward Momentum
A report by Glassnode highlighted that open interest in Bitcoin futures has reached a new high of $27 billion. Binance has led the charge with over $5.2 billion in open interest, accounting for nearly 20% of all market futures. Cryptocurrency market volatility is still an issue for many investors, and such an aggressive stance on the price of Bitcoin will only intensify their concerns.
With new regulatory actions set in place, exchanges such as CME Group aim to improve cryptocurrency investment by offering micro-futures. Investors can enter the cryptocurrency futures market with as little as one-tenth of the price of Bitcoin. What’s more, Horizons ETFs Management will allow traders to long or short Bitcoin futures on the Toronto Stock Exchange. Still, access to spot trading for Bitcoin is hard to come across in the US, although Bitcoin derivatives are becoming more accepted in the US market.
In a report to investors, JP Morgan has claimed Bitcoin is becoming less volatile and the risks associated with investing in cryptocurrency are decreasing. More investment firms are showing interest in Bitcoin, and derivatives options will “help normalize” the price of the leading digital currency in the US. However, as highlighted by WuBlockchain, the increase in open positions will only generate more instability in the market as institutional traders with high market capital will hedge their bets in favor of Bitcoin until contracts are closed.
Data from Arcane Research reinforces a strong belief in Bitcoin. A high premium in futures contracts and leverage toward higher highs indicate investors are confident in the cryptocurrency’s price. Additionally, investors deem a short position toward Bitcoin to be “unwise.”
On the Flipside
- Extreme leverage is being used, which could be a catalyst for a new flash crash in Bitcoin.
- Open interest in Bitcoin has declined significantly since March contracts ended.
- There has been a decrease in futures volume from $117 billion in March to $50 billion in April.
Overall Bullish Sentiment
Open Bitcoin options are not the only indicator that investors are becoming more confident that the price of the cryptocurrency will reach new highs. Similar to the price increases from December 2020 and early 2021, Bitcoin miners are showing signs they are unwilling to sell for the current price. In December, miners’ decisions not to sell led to the price of Bitcoin doubling.
The dominant uptrend is reflected in the entire cryptocurrency market. Premium alt-coins such as TRX, VeChain, and Ethereum have entered the “alt season,” with prices reaching a new all-time high nearly every day. Although prices have increased for both alt-coins and BTC, data from Google shows retail mania has yet to begin. As more institutional and retail investors claim a share of the cryptocurrency market, the total market cap is set to reach a new record.
Moreover, Bitcoin futures is not the only cryptocurrency for investors. Ethereum has seen an increase in volume futures options which spiked by 90% on April 13, reaching $380 million. Coinbase might not be the main catalyst for the spike in volume as investors are also considering Ethereum’s upcoming consensus change and the release of Ethereum 2.0. That could mean Ethereum will be more similar to Bitcoin as a store of value as more miners and investors will stake their coins.