Bitcoin traders’ evolving view of BTC’s role in every portfolio bolsters $100K support

Key takeaway:

Bitcoin’s struggles to overtake the $105,000 level as US macroeconomic headwinds remain a challenge.

Steady inflows from institutional investors and the strength of the $100,000 support point to growing confidence in Bitcoin.

Bitcoin (BTC) has struggled to break above $105,000 since May 10, leading traders to question whether the bullish momentum has faded. Although BTC managed to reclaim the $104,000 level, demand for leveraged long positions has dropped sharply, as indicated by the decline in the Bitcoin futures premium.

On May 14, the annualized Bitcoin futures premium peaked at 7%, but then fell to 5%, which is near the neutral-to-bearish threshold and matches the level seen four weeks ago when BTC traded around $84,500. 

This decline in demand for leveraged bullish positions appears to be linked to broader macroeconomic uncertainty, since Bitcoin’s price has been closely following movements in the stock market.

The S&P 500 futures reversed early weakness on May 15, coinciding with Bitcoin’s rebound from $101,800 to $104,000. Investors seem more confident that the US Treasury will be compelled to inject liquidity after Federal Reserve Chair Jerome Powell warned that “supply shocks” could keep interest rates higher for longer than expected.

Signs of economic weakness have also emerged. The US Bureau of Labor Statistics reported that April’s Producer Price Index fell 0.5% from the previous month, while economists surveyed by FactSet had anticipated a 0.2% rise. According to Reuters, investors’ limited risk appetite is also influenced by ongoing global trade tensions, as the US–China tariff agreement remains only a temporary solution.

Demand for fixed income has increased, with the yield on the 10-year US Treasury dropping to 4.45% after reaching 4.55% on May 14, reversing the previous week’s trend. Historically, Bitcoin tends to perform better when government bond yields are rising, as this signals reduced confidence in the Treasury’s ability to manage its debt.

Bitcoin’s rally to $105,000 hinges on macroeconomic trends

To assess whether traders are simply avoiding leverage or actively betting on a price decline, it is helpful to analyze Bitcoin options demand. Typically, periods of bearish sentiment push the BTC delta skew indicator above the neutral 6% threshold.

Contrary to expectations, Bitcoin put (sell) options have been trading at a discount compared to call (buy) options, signaling strong confidence in the $100,000 support level. However, the optimism seen on May 14 has faded, with the indicator now at a neutral -4%.

Related: What the 10-year Treasury yield means for crypto yields and stablecoins

Since Bitcoin’s price has closely mirrored the US stock market, the chances of breaking above $105,000 depend heavily on macroeconomic developments, such as trends in the US Federal Reserve’s balance sheet and recession risks. Notably, Bitcoin’s high correlation with the S&P 500 rarely persists for more than two months.

Net inflows of $320 million into US Bitcoin exchange-traded funds (ETFs) on May 14 point to ongoing institutional demand. This suggests that investors are gradually shifting their perception of Bitcoin from a risk-on asset to a non-correlated instrument, which may reduce the likelihood of sharp price corrections, even in the absence of strong leveraged bullish positions.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.