Essential Insights:
Despite recent price declines, demand for Bitcoin futures remains strong, showcasing ongoing trader interest.
Put options continue to outpace calls, indicating ongoing bearish sentiment among investors.
On Monday, Bitcoin (BTC) dipped to $109,400, marking its lowest price in over six weeks. This pullback followed an $11 billion liquidation by a dormant whale who had held their position for five years, with the proceeds being funneled into Ether (ETH) spot and futures on Hyperliquid.
Even with the price drop, Bitcoin futures demand surged to record levels, leading traders to speculate whether $120,000 is the next viable target.
The Bitcoin futures open interest reached an all-time high of BTC 762,700 on Monday, reflecting a 13% increase from two weeks prior. This heightened demand for leveraged positions suggests traders continue to engage with the market despite a 10% decline since Bitcoin’s all-time peak on August 14.
While this trend is encouraging, the $85 billion in futures open interest doesn’t inherently indicate bullishness, as longs (buyers) and shorts (sellers) always balance each other. An overreliance on leverage by bulls could lead to cascading liquidations if prices drop below $110,000.
The premium on Bitcoin futures is now at a neutral 8%, up from 6% last week. Importantly, this metric has failed to hold above the 10% neutral line for over six months, indicating that even the all-time high of $124,176 did not generate widespread bullish sentiment.
Leverage Shakeout Reveals Liquidity Yet Raises Questions
Recent price declines caught many overleveraged traders off guard, resulting in $284 million in liquidations of long positions, according to CoinGlass data. This incident demonstrated Bitcoin’s substantial liquidity, even during weekends, although the swift execution raised doubts due to the long-term nature of the seller’s position.
The funding rate for Bitcoin perpetual futures fell back to 11% after a brief increase. Normally, this rate fluctuates between 8% and 12% in neutral market conditions. Some of the subdued sentiment can be attributed to $1.2 billion in net outflows from U.S.-listed spot Bitcoin ETFs between August 15 and August 22.
To gauge whether this cautious stance is concerning, traders should look at the BTC options market.
Put options currently carry a 10% premium over call options, a clear indicator of bearish sentiment. While fear is prevalent, it’s not uncommon following a $6,050 drop in Bitcoin price over just two days. This market psychology is likely being influenced by whales reallocating from Bitcoin to Ether, though such trends typically stabilize over time.
Related: Strategy acquires $357M in Bitcoin as prices dip to $112K
Although recent weakness has dampened sentiment, the possibility of a Bitcoin upswing toward $120,000 still exists. However, any sustained movement upward may depend on renewed inflows into spot ETFs, especially amid uncertain global growth. For now, the upcoming $13.8 billion monthly options expiry on Friday could act as the catalyst for investors to re-enter the market.
This article is for informational purposes only and does not constitute legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.
