Key takeaways:
Persistent spot market accumulation from Bitcoin ETFs and Strategy provided a price floor for Bitcoin and threatens to trigger a short squeeze.Negative funding rates and cautious options skews could trap bears if the Federal Reserve policy shifts or high oil prices trigger higher inflation.
Bitcoin (BTC) price sustained levels above $76,000 for the past week, distancing itself from its year low at $60,500. The recent bullish momentum came as crude oil prices jumped above $100 and the S&P 500 hit new trading highs, but futures market data may point to a short-term rally-ending outcome for Bitcoin.
A total of $1.4 billion in leveraged short positions near $80,000 has been built over the past 48 hours, according to CoinGlass data, and Bitcoin’s rejection at $79,500 has raised alarm.
Estimated Bitcoin futures liquidation levels, USD. Source: CoinGlass
Federal Reserve decision, inflation data may push Bitcoin above $80,000
The lack of investors’ appetite for bullish Bitcoin leverage has been evident, but a bear trap could spring if the US Federal Reserve adopts a less restrictive monetary policy or if investors anticipate higher inflation, which would reduce the expected net returns from fixed-income assets.
Bitcoin perpetual futures annualized funding rate. Source: Laevitas
The Bitcoin perpetual futures annualized funding rate has remained mostly negative over the past two weeks, a typical sign of growing bearish confidence. Curiously, this happened while Bitcoin’s price jumped to $78,000 from $72,000 on April 9 and most of those bets are at a loss at $76,700. A rally above $80,000 would likely force traders to close their positions.
Data show investors are no longer anticipating interest rate hikes from the Fed, even as Brent crude prices have reclaimed the $100 level. The pressure from high energy prices has a cascading impact on inflation expectations, but the Fed is also concerned with the weakening job market and economic growth.
Implied target rate probabilities for Sept. 16 Fed meeting. Source: CME FedWatch tool
US government bond futures contracts presently indicate 20% odds of interest rates…
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