Despite Bitcoin’s recent surge towards the $70,000 level, data from derivatives markets reveals that investors remain cautious and a strong bullish momentum has not yet formed.
While a price recovery is noticeable in the cryptocurrency market, indicators in derivatives suggest that risk appetite remains limited. Despite Bitcoin rising from $60,000 to the $70,000 range, investors appear reluctant to open aggressive long positions.
The funding ratio paid between long and short position holders in Bitcoin perpetual (futures) contracts remains below zero. A negative funding ratio is considered a bearish signal, indicating that short positions are dominant in the market and investors are demanding an additional premium to hold long positions. This suggests that despite rising prices, market participants are positioned against downside risks.
Another important indicator in the derivatives market, open interest data, also shows no sign of recovery. According to Coinglass data, the total amount of open interest in Bitcoin perpetual futures has fallen by 51 percent compared to its peak in October. The lack of a significant recovery in open interest after the decline that began in October indicates that investor confidence has not yet been fully restored.
Andy Martinez, CEO of Crypto Insights Group, stated that liquidity and market depth have significantly decreased since the market crash on October 10th, adding, “This has led investors to reduce leverage and adopt more conservative strategies. The market is still trying to digest the developments since October 10th.”
Data from the options market paints a similar picture. According to Griffin Ardern, Head of Research and Options at BloFin, Bitcoin’s implied volatility, which was at 83 percent last Thursday, has now fallen to around 60 percent. This decrease indicates that the market is not expecting sharp price movements in the short term.
However, positioning indicators remain cautious. The 25-delta call-put skew indicator, which measures the balance between fear and greed in the options market, reveals a strong bias towards put options. This indicates that investors have a high demand for hedging against downside risks.
Ardern stated that the impact of leverage on prices has significantly decreased, reducing volatility and stabilizing prices. However, she emphasized that this also means many investors are taking profits or cutting losses at low levels, adopting a wait-and-see strategy, or temporarily exiting the market. According to Ardern, markets dominated by a bearish sentiment generally indicate a period of horizontal consolidation rather than a rapid recovery.
On the other hand, the busy macroeconomic calendar reinforces the cautious stance. Le Shi, Managing Director of Auros Hong Kong, noted that although the market seemed to have found support last week, participants remain extremely cautious due to numerous potential risk factors.
Shi stated that political developments in Japan, volatility in the precious metals market, and concerns regarding the AI-driven stock rally are also limiting risk appetite in the crypto market.
