Bitcoin (BTC) has been experiencing a period of consolidation, trading in a narrow 4.5% range around the $34,700 mark for the past two weeks. Despite this stagnation, there has been a 24.2% gain since October 7, largely driven by the looming effects of the 2024 halving and the potential approval of a Bitcoin spot exchange-traded fund (ETF) in the United States.
One of the factors contributing to investor concerns is the bearish global economic outlook. There is growing apprehension about macroeconomic data supporting a global economic contraction, particularly with the U.S. Federal Reserve holding their interest rates above 5.25% in an effort to control inflation. Additionally, recent reports of China’s exports shrinking by 6.4% and Germany reporting a 1.4% decline in industrial production further contribute to the economic skepticism.
This weakened global economic activity has in turn impacted WTI oil prices, which have dipped below $78 for the first time since late July. Despite potential supply cuts from major oil producers, remarks by U.S. Federal Reserve Bank of Minneapolis President Neel Kashkari have set a bearish tone, prompting a ‘flight-to-quality’ response. Investors have sought refuge in U.S. Treasuries, resulting in the 10-year note yield dropping to 4.55%, its lowest level in six weeks.
Interestingly, the S&P 500 stock market index has defied expectations, reaching 4,383 points, its highest level in nearly seven weeks amidst a global economic slowdown. This can be attributed to the fact that firms within the S&P 500 collectively hold $2.6 trillion in cash and equivalents, offering some protection in the face of high interest rates.
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Amidst this economic turbulence, Bitcoin’s futures open interest has reached its highest level since April 2022, standing at $16.3 billion, with the Chicago Mercantile Exchange (CME) solidifying its position as the second-largest market for BTC derivatives.
The healthy demand for Bitcoin options and futures is making headlines in the media. Given the potential for a spot BTC ETF and the Bitcoin halving in 2024, investors are increasingly leveraging Bitcoin futures to capitalize on these bullish catalysts. The Bitcoin futures premium, which measures the difference between two-month futures contracts and the current spot price, has reached its highest level in over a year at 11%, indicating strong demand primarily driven by leveraged long positions.
Likewise, the Bitcoin options markets show a strong demand for call (buy) options compared to put (sell) options, with a 40% bias favoring call options over the past week. Bitcoin options open interest has seen a 51% increase over the past 30 days, reaching $15.6 billion. This growth has been driven by bullish instruments, as indicated by the put-to-call volume data.
Despite Bitcoin’s price reaching its highest level in 18 months, the derivatives market reflects healthy growth with no signs of excessive optimism. This aligns with the bullish outlook targeting $40,000 and higher prices by year-end.
It’s important to note that this information, while based on market trends and indicators, does not constitute legal or investment advice. The views and opinions expressed are the author’s own and do not necessarily reflect those of Cointelegraph.
