Key takeaways:
- Despite muted on-chain activity and limited engagement in derivatives markets, record inflows into spot ETFs signal robust institutional demand.
- The lack of leveraged long positions could even support further gains, as rising prices may force sidelined or short-positioned traders to buy back in.
Bitcoin (BTC) rose 7% over the past week, climbing above $81,000 for the first time in more than three months. Despite the strong price surge, derivatives data show limited investor optimism, raising concerns about whether the rally can be sustained.
Derivatives markets lag behind Bitcoin’s $81K breakout
Meanwhile, macroeconomic indicators and several on-chain metrics suggest that demand may be weakening.
Bitcoin’s monthly futures carried just a 1% annualized premium over spot on Tuesday—well below the neutral range. In typical conditions, sellers expect a 4% to 8% premium to offset the cost of capital. This subdued sentiment has persisted since late January, when Bitcoin was near $90,000, helping explain the current lack of excitement in the market.
To determine whether this weakness is confined to futures, it’s important to examine the balance between put (sell) and call (buy) options. In neutral markets, these typically trade within a -6% to +6% range relative to each other. When professional traders grow concerned about downside risk, the delta skew rises above 6%.
Bitcoin’s delta skew edged closer to the 6% neutral mark on Tuesday, though it remained slightly tilted to the bearish side. Large traders and market makers don’t seem overly concerned about an immediate downturn, but bullish conviction has clearly stalled. Meanwhile, Brent crude oil prices hovering around $110 continue to fuel inflation concerns, dampening expectations for economic growth.
US inflation expectations climbed toward a 10-year high of 2.5%, according to the Federal Reserve Bank of Cleveland. At the same time, investors are demanding higher yields to hold Eurozone government bonds. Despite these inflationary signals, the tech-heavy Nasdaq 100 Index reached a fresh all-time high on Tuesday, pointing to a broader risk-on sentiment in markets.
Falling on-chain activity contrasts with strong spot ETF inflows
Bitcoin may be benefiting from this renewed appetite for risk, but weakening on-chain metrics suggest that retail demand is continuing to fade.
Daily Bitcoin network transfer volume has dropped 54% over the past three months to $4.1 billion, while the number of transactions is approaching its lowest level in more than five years. Although price action isn’t entirely dependent on on-chain activity, these figures often reflect broader public interest and adoption trends.
A temporary pause in Strategy’s (MSTR) Bitcoin purchases ahead of its earnings release may have added to market unease. The company, led by Michael Saylor, had been aggressively accumulating over the previous four weeks. However, analysts expect it to post a quarterly net loss due to mark-to-market accounting on its Bitcoin holdings.
At the same time, macroeconomic headwinds and weakening on-chain data have weighed on Bitcoin derivatives markets. Still, $1.16 billion in net inflows into US-listed spot Bitcoin ETFs between Friday and Monday highlights growing institutional demand.
In the end, the lack of appetite for leveraged long positions could actually support further gains. As prices rise, short sellers may be forced to cover their positions at a loss, adding fuel to the rally.
