Bitcoin (BTC) has seen consistent trading within a narrow 4.5% range over the past two weeks, with prices hovering around the $34,700 mark. Despite the lack of significant price movement, the cryptocurrency has recorded a 24.2% increase since Oct. 7, instilling confidence among investors. This upward momentum has been attributed to the impending effects of the 2024 halving and the potential approval of a Bitcoin spot exchange-traded fund (ETF) in the United States.
However, while Bitcoin’s performance has been relatively stable, investors are expressing concerns over the bearish global economic outlook. Recent macroeconomic data points to a potential global economic contraction, with reports of China’s exports shrinking by 6.4% from a year earlier in October and Germany reporting a 1.4% decrease in industrial production in the same month. These indicators, coupled with the U.S. Federal Reserve’s decision to maintain its interest rates above 5.25% to combat inflation, have raised fears among investors.
The impact of the weaker global economic activity has also been felt in oil prices, which dipped below $78 for the first time since late July, despite the potential for supply cuts from major oil producers. Comments made by U.S. Federal Reserve Bank of Minneapolis President Neel Kashkari on Nov. 6 further fueled the bearish sentiment, leading to a ‘flight-to-quality’ response among investors. Kashkari stated, “We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.”
In response to the uncertain economic conditions, investors have sought refuge in U.S. Treasuries, causing the 10-year note yield to drop to 4.55%, its lowest level in six weeks. Interestingly, the stock market has defied expectations during the global economic slowdown, with the S&P 500 reaching 4,383 points, its highest level in nearly seven weeks. This unexpected performance can be attributed to firms within the S&P 500 collectively holding $2.6 trillion in cash and equivalents, which provides some protection as interest rates remain high. Additionally, the stock market offers both scarcity and dividend yield, aligning with investor preferences during times of uncertainty.
Meanwhile, the futures open interest for Bitcoin has reached its highest level since April 2022, standing at $16.3 billion. The Chicago Mercantile Exchange (CME) has cemented its position as the second-largest market for BTC derivatives, underscoring the healthy demand for Bitcoin options and futures.
The current market dynamics reveal strong demand for Bitcoin futures, primarily driven by leveraged long positions, with the annualized premium at 11%, the highest level in over a year. Additionally, the Bitcoin options markets indicate a 40% bias favoring call options (buy) over put options (sell), further highlighting the bullish sentiment among investors. The open interest for Bitcoin options has also seen a 51% increase over the past 30 days, reaching $15.6 billion, primarily driven by bullish instruments.
As Bitcoin aims for higher prices and targets $40,000 by year-end, the derivatives market paints a picture of healthy growth with no signs of excessive optimism. Despite the prevailing economic concerns, the outlook for Bitcoin remains bullish, further strengthening investor confidence in the cryptocurrency’s potential for future gains.
It is important to note that this article is for general information purposes and not intended as legal or investment advice. The views expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph.