QCP Capital highlights the role of spot Bitcoin ETFs in bolstering Bitcoin’s potential while cautioning against unsustainable funding rates.
The ongoing surge in Bitcoin prices challenges earlier market predictions regarding the influence of spot Bitcoin ETF inflows, previously anticipated to drive the cryptocurrency to new all-time highs by March’s end.
With Bitcoin surpassing the $59,000 mark on Wednesday, marking a notable 5% increase, signs point towards a potential new peak materializing sooner than initially expected.
Amidst Concerns Over Funding Rates, Spot ETFs Offer Stability
The current rally is primarily fueled by heightened demand, evident in spot ETF volumes surpassing $3.2 billion with net inflows totaling $520 million. This rapid price surge has prompted short liquidations and incited speculative buying, causing funding rates to spike on native exchanges and extending to longer-end futures trading, reaching over 16% above the spot price.
QCP Capital’s recent analysis reveals that the initial response from the options market was unexpectedly restrained. Traders holding long calls were actively capitalizing on profits, and interest in downside gamma was evident. Consequently, risk reversals, reflecting the difference between call-implied volatility and put-implied volatility, remained around 3%, a deviation from the norm considering the magnitude of the spot price movement.
Despite the continuous climb in spot prices, demand for volatility surged, although such spikes in fluctuation were promptly sold off. Despite significant price movements, the prevailing upward trajectory has maintained realized volatility close to 40%. The crypto asset trading firm identifies the $60k strike as a natural target for March’s expiry.
Looking forward, QCP Capital acknowledges the potential dampening of speculative fervor due to unsustainable funding rates, possibly resulting in leverage washouts and a retreat to the $50,000 level.
However, the ongoing influx of substantial spot ETF inflows acts as a counterbalance, likely sustaining the upward trend, particularly with the upcoming BTC halving on the horizon.
Traders and Speculators Reengage with Bitcoin
The recent surge in Bitcoin’s price reignites interest among traders and speculators, as observed by Glassnode. Across various Bitcoin investor groups, including institutional buyers and short-term holders, risk appetite is increasing.
Data from the on-chain intelligence platform indicates heightened trading and speculative activities, fueled by nearly record-breaking daily exchange volumes of $5.57 billion, primarily influenced by short-term holders.