Bitcoin (BTC) has traded in a narrow range of 7% since November 12, signaling a consolidation period around the $91,000 level. However, the derivatives products indicate that professional traders remain confident in the bullish market. Additionally, multiple attempts to break above $92,000 suggest strong buying demand beyond MicroStrategy's BTC purchases.
The 25% delta skew of the 30-day Bitcoin (put-call) options at Deribit. Source: Laevitas.ch
The BTC options delta skew has dropped to its lowest level in four months, indicating that the market is pricing a discount for put options. Levels below -6% signal optimism and reflect confidence in the $87,000 support, particularly from whales and arbitrage desks.
While the data shows optimism, it does not guarantee that investors have fully embraced the bullish market continuation. It is crucial to analyze the factors driving the recent momentum. For instance, if analysts view MicroStrategy as the primary driver for Bitcoin's new ATH, signs should emerge in the BTC futures and spot markets.
Is MicroStrategy the sole driver behind Bitcoin's price surge?
It is speculated that some entities are responsible for the buying activity above $87,000 after MicroStrategy disclosed the purchase of an additional 51,780 BTC on November 18. According to SEC filings, the company now holds over $29 billion in Bitcoin and is actively pursuing a plan to raise $21 billion through the issuance and sale of MSTR shares.
Conversely, investors believe that Bitcoin has the potential for further price appreciation if the net inflows of a spot BTC ETF show signs of early approval, including increased exposure from pension funds and large hedge fund managers. However, the latest data from November 14 and 15 revealed $771 million in net ETF outflows as investors decided to take profits after the recent rally.
To understand how professional traders are positioning themselves, analyzing the Bitcoin futures and spot markets is necessary. For example, the persistent demand for leveraged BTC futures contracts signals optimism, while the increased use of price hedging suggests that whales and arbitrage desks are not confident in the current price momentum.
The 2-month Bitcoin futures annualized basis. Source: laevitas.ch
The 2-month Bitcoin futures annualized basis (perpetual rate) spiked to 17% on November 18, well above the neutral range of 5% to 10%. This level of optimism was last observed nearly eight months ago, at the end of March, when Bitcoin successfully defended the $64,000 level after two weeks of downward pressure.
To further assess trader sentiment, the BTC spot market should be analyzed. Unlike derivatives, which always require a buyer and a seller, the spot market allows traders to borrow stablecoins to buy Bitcoin immediately. Similarly, short-sellers can borrow BTC to create short positions, betting on a price decline.
The long-short ratio of Bitcoin at OKX. Source: OKX
Currently, the long-short ratio of Bitcoin on OKX is 14 times skewed towards the long (buy) side. Historical data shows that periods of excessive optimism have pushed the ratio above 40 times, while levels below 5 times favoring the long side are typically considered bearish.
In conclusion, the Bitcoin derivatives and spot markets signal strong bullish momentum, regardless of the concentration of buying activity from MicroStrategy. The lack of a significant impact from the retest of the $88,700 level on November 17 further suggests that investors are not yet ready to exit at the first negative price swing.
