Key Points:
Despite recent price weakness, demand for Bitcoin futures continues to rise, indicating sustained trader participation.
Bearish options maintain a premium over bullish options, reflecting ongoing bearish sentiment among investors.
Bitcoin (BTC) fell to $109,400 on Monday, marking a new low in over six weeks. This pullback was triggered by a dormant whale selling $11 billion worth of Bitcoin and reallocating the proceeds into Ethereum (ETH) spot and futures on the decentralized exchange Hyperliquid.
Despite the price drop, open interest in Bitcoin futures surged to an all-time high, with traders beginning to discuss whether $120,000 will be the next target.
Open interest in Bitcoin futures reached a historical high of 762,700 BTC on Monday, a 13% increase from two weeks ago. The demand for leveraged positions indicates that even with a 10% price drop since Bitcoin hit its all-time high on August 14, traders have not exited the market.
While this is a positive sign, the $85 billion in futures open interest does not necessarily represent market optimism, as longs and shorts are always matched. If longs become overly reliant on leverage, a price drop below $110,000 could trigger a cascade of liquidations.
The Bitcoin futures premium is currently at a neutral level of 8%, up from 6% the previous week. Notably, this metric has never sustained above the 10% neutral threshold in the past six months, indicating that even with Bitcoin reaching an all-time high of $124,176, widespread bullish sentiment has not been ignited.
According to CoinGlass, the recent drop caught high-leverage traders off guard, leading to $284 million in long positions being liquidated. This event shows that Bitcoin maintains deep liquidity even over the weekend. However, such rapid transaction speeds have raised market concerns, especially since sellers had held these positions for years.
The annualized funding rate for Bitcoin perpetual futures fell back to 11% after a brief rise. In a neutral market environment, this rate typically ranges between 8% and 12%. Some market sentiment is subdued, attributed to a net outflow of $1.2 billion from U.S.-listed Bitcoin spot ETFs between August 15 and 22.
Traders looking to assess whether the current cautious sentiment is worrisome should pay attention to the BTC options market.
The implied volatility of bearish options is currently 10% higher than that of bullish options, clearly reflecting bearish sentiment. While panic is evident, such a situation is not uncommon after Bitcoin dropped $6,050 in just two days. Market sentiment is likely influenced by whales shifting positions from Bitcoin to Ethereum, although such capital flows typically stabilize over time.
Despite the recent weak market performance, expectations for Bitcoin to hit $120,000 remain. However, any sustained upward movement still relies on a reflow of capital into spot ETFs, especially in the context of uncertain global growth prospects. In the short term, $13.8 billion in monthly options will expire on Friday, which could serve as a key catalyst for whether investors return to the market.
Related: Preston Pysh: Bitcoin (BTC) holders' skepticism towards institutions is hard to shake off
Original: “Even as BTC Falls, Demand for Bitcoin Futures Rises: What’s Behind It?”
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