Bitcoin (BTC) has been trading within a tight 4.5% range over the past two weeks, with prices hovering around $34,700. Despite this period of price stability, the cryptocurrency has recorded gains of 24.2% since October 7, largely driven by anticipation of the 2024 halving event and the potential approval of a Bitcoin exchange-traded fund (ETF) in the United States.
Amid concerns about a bearish global economic outlook, some investors remain cautious. The worries stem from bearish macroeconomic data pointing to a global economic slowdown and the U.S. Federal Reserve's decision to maintain its interest rate above 5.25% in an effort to combat inflation. Notably, Chinese exports shrank by 6.4% in October compared to the previous year, and Germany reported a 1.4% decline in industrial production for October.
The weakened global economic activity has pushed WTI oil prices below $78 for the first time since late July, despite the potential for supply cuts by major oil-producing nations. Furthermore, comments by Neel Kashkari, President of the U.S. Federal Reserve Bank of Minneapolis, regarding the ongoing inflation challenge have contributed to a "flight-to-quality" response among investors.
Kashkari's statement, "We haven't completely solved the inflation problem. We still have more work ahead of us to get it done," has prompted a preference for U.S. Treasuries, resulting in a drop in the 10-year note yield to 4.55%, its lowest level in six weeks. Surprisingly, the S&P 500 stock market index has surged to 4,383 points, reaching its highest level in almost seven weeks, defying expectations amid a global economic slowdown.
S&P 500 firms hold $2.6 trillion in cash, offering protection amid high interest rates. Bitcoin futures reach a high with Chicago Mercantile Exchange as a major player. Demand for leverage grows, fueled by potential spot Bitcoin ETF and the halving. Bitcoin futures premium signals market health, aiming for 5%-10% range.
It's noteworthy that this indicator has reached its highest level in over a year, standing at 11%, indicating robust demand for Bitcoin futures, primarily due to leveraged long positions. Conversely, if investors were predominantly betting on a decline in Bitcoin's price, the premium would remain at 5% or lower.
Bitcoin options show bullish sentiment with a 40% preference for call (buy) options. Open interest grows by 51% to $15.6 billion, driven by bullish instruments.
With Bitcoin's price achieving its highest level in 18 months, a degree of skepticism and hedging may be expected. Nevertheless, the current conditions in the derivatives market show healthy growth without signs of excessive optimism, aligning with the bullish outlook targeting prices of $40,000 and higher by year-end.
