Key takeaways:
Demand for Bitcoin futures keeps increasing despite recent price drops, showing ongoing trader involvement.
The put options have stayed at a premium over calls, indicating a lingering bearish outlook among investors.
Bitcoin (BTC) fell to $109,400 on Monday, marking its lowest point in over six weeks. This downturn followed an $11 billion sell-off by a whale that had been inactive for five years, with the proceeds being shifted into Ether (ETH) spot and futures on the decentralized exchange Hyperliquid.
Even with the price decline, Bitcoin futures demand soared to a record high, leading traders to speculate if $120,000 is the next achievable target.
Bitcoin futures open interest, BTC. Source: CoinGlass
On Monday, Bitcoin futures open interest reached an all-time high of BTC 762,700, reflecting a 13% increase from two weeks prior. This elevated demand for leveraged positions suggests traders are not exiting the market, even with a 10% price dip since Bitcoin’s peak on Aug. 14.
While this indicates a positive trend, the $85 billion in open interest doesn’t necessarily signal optimism, as longs (buyers) and shorts (sellers) are always matched. An over-reliance on leverage by bulls could lead to rapid liquidations if prices dip below $110,000.
Bitcoin 2-month futures annualized premium. Source: Laevitas.ch
The Bitcoin futures premium currently stands at a neutral 8%, a rise from 6% the week before. Interestingly, this metric hasn’t been above the 10% neutral threshold for over six months, indicating that even the $124,176 all-time high failed to generate widespread bullish sentiment.
Leverage shakeout highlights liquidity but sparks suspicion
The recent drop caught many overleveraged traders off-guard, resulting in $284 million in long position liquidations, according to CoinGlass data. This event demonstrated that Bitcoin retains substantial liquidity even on weekends, but the rapid execution raised eyebrows since the seller had held the position for years.
Bitcoin perpetual futures annualized funding rate. Source: Laevitas.ch
The funding rate for Bitcoin perpetual futures fell back to 11% after a brief spike. In neutral markets, this rate typically fluctuates between 8% and 12%. Some of the subdued sentiment can be attributed to $1.2 billion in net outflows from US-listed spot Bitcoin ETFs between Aug. 15 and Aug. 22.
To determine whether this level of caution is concerning, traders should look at the BTC options market.
Bitcoin options 30-day delta skew (put-call). Source: Laevitas.ch
Put options are presently trading at a 10% premium over call options, signaling a clear bearish sentiment. Though there is evident excessive fear, this reaction is not unusual after a $6,050 Bitcoin price drop in just two days. Market psychology has likely been swayed by whales reallocating their exposure from Bitcoin to Ether, but these shifts typically stabilize over time.
Related: Strategy buys $357M in Bitcoin as price drops to $112K
While recent weakness has impacted sentiment, the possibility of a Bitcoin rally towards $120,000 remains. However, any significant upward movement will likely depend on renewed inflows into spot ETFs, especially amid uncertain global growth. For now, the $13.8 billion monthly options expiry on Friday could act as the determinant for whether investors re-enter the market.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
