Bitcoin (BTC) rose 2.5% on June 3 to $69,400, raising hopes that it can reclaim the $69,000 support level for the first time in 11 days. This positive price movement coincided with the Bitcoin futures premium hitting a seven-week high. But what does this mean for the sustainability of Bitcoin’s rise towards $70,000?
GameStop mania and weaker prospects for Fed interest rate cuts
Some analysts believe that Bitcoin’s recent price rally was partly influenced by GameStop’s (GME) impressive 36% rise. This rally in GameStop shares has revived memories of the anti-traditional financial sentiment of 2021, when retail investors banded together to challenge the status quo. This sentiment appears to have extended to the memecoin sector, with Floki up 16.5%, Dogwifhat (WIF) up 9%, and Bonk up 7.5%.
Additionally, comments from the Federal Reserve (Fed) to Neel Kashkari in Minneapolis added to the uncertainty. The Fed official said he did not expect a rate cut in the near future, citing Americans’ strong aversion to inflation. This position, while not universally shared by Fed officials, is considered negative for the housing and stock markets. As a result, some investors are turning to alternative investments such as Bitcoin.
Global geopolitical tensions have also played a role in Bitcoin’s recent price action. Australia’s decision to order Chinese investors to reduce their stakes in a rare earth mining company has increased uncertainty in global markets. The move coincided with a 1% rise in gold and heavy selling in US Treasuries, with the 5-year yield falling to 4.42% from 4.59% on May 31.
Bitcoin Derivatives Support Further Price Rises
The Bitcoin futures premium reflects the difference between the derivative markets of monthly contracts and the spot level on regular exchanges. Typically, an annual premium (base) of 5% to 10% is paid to compensate for the extended settlement. Essentially, a higher premium indicates that traders are willing to pay more for futures contracts, which indicates bullish sentiment.
The premium for 3-month Bitcoin futures reached 15%, hitting a seven-week high. This indicates a cautiously optimistic sentiment among traders, which is necessary to avoid cascading liquidations during unexpected negative price swings. However, to deduce whether this sentiment exists only in the futures markets, one must analyze Bitcoin options with a delta of 25%.
Delta bias measures the relative demand for bullish and bearish options. A negative bias indicates strong demand for call (purchase) options, while a positive bias indicates a preference for put (sell) options. Neutral markets typically maintain an asymmetric delta between -7% and +7%, indicating balanced pricing between calls and puts.
about: Will Bitcoin benefit from the European Central Bank’s interest rate cut?
Note that the 25% delta gap measure has remained stable near -3% over the past week, indicating that traders are neither too optimistic nor too pessimistic about the price action of the Bitcoin in the short term. The last time Bitcoin options showed signs of optimism was on May 21, but that was short-lived as resistance at $71,500 proved difficult to overcome.
Recent data indicates a healthy Bitcoin market, with demand driven by a combination of factors including fear of recession, geopolitical uncertainty, and a surge in traditional anti-financial sentiment. Key metrics such as the Bitcoin futures premium and a 25% delta spread indicate cautious optimism among traders, providing a stable basis for further price gains above $70,000.
This article is intended for general information purposes and is not intended and should not be relied upon as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
