The price of Bitcoin (BTC) rallied over 12% on February 15, marking the highest daily close in more than six months. Curiously, the move came as gold hit a 40-day low of $1,826, indicating some potential changes in investors’ risk assessments for cryptocurrencies.
A stronger-than-expected US inflation report on February 14th showed 5.6% year-on-year growth, followed by data showing resilient consumer demand prompting traders to rethink their lack of Bitcoin. US retail sales increased 3% in January compared to the previous month – the highest gain in nearly two years.
On-chain data shows that the new gains can be traced back to mysterious institutional investors who started buying on February 10. According to Lookonchain data, almost $1.6 billion in funds have flowed into the crypto market between February 10 and February 15. The analysis shows that three prominent USD Coin (USD) wallets are sending funds to multiple exchanges at the same time.
More importantly, news has emerged that the Binance exchange is ready to face penalties and complete outstanding regulatory and law enforcement investigations in the US, according to a February 15 Wall Street Journal report. The exchange’s head of strategy, Patrick Hillmann, added that Binance “is very stable and feels good about the discussion.”
Let’s take a look at derivative metrics to better understand how professional traders are positioned in current market conditions.
Bitcoin margined longs enter “FOMO” range.
The margin market provides insight into the positions of professional traders as it allows investors to borrow cryptocurrency to leverage their positions.
For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only fight (short) cryptocurrency. Unlike futures contracts, the balance between long and short margins is not always optimal.
The chart above shows that the OKX trader’s margin credit ratio increased between January 13 and January 15, signaling that professional traders increased leveraged long positions as Bitcoin price broke above the $23,500 resistance.
One could argue that the demand to borrow stablecoins for bullish positions is too great because the stablecoin/BTC margin lending ratio above 30 is unusual. However, traders tend to deposit more securities after a few days or weeks, causing the indicator to exit the FOMO level.
Options traders remain skeptical of a sustained rally
Traders should also analyze the options market to understand whether the recent rally has caused investors to become more risk averse. A 25% delta skew is a sign that arbitrage tables and market makers are charging for upside or downside protection.
The indicator compares the same call (buy) and put (sell) options and will be positive when fear is prevalent because the premium of the protective put option is higher than the risky call option.
In short, the tilt metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, general happiness shows a 10% negative skew.
related: $24K Bitcoin – Is it time to buy BTC and altcoins? Watch Market Talks live
Note that the 25% delta skew has been neutral over the past two weeks, signaling the same price for both bullish and bearish strategies. This reading is unusual because Bitcoin gained 16.2% from January 13th to January 16th and normally, one would expect such a large amount of bullishness to cause the slope to fall below negative 10.
One thing is certain, the lack of bearish sentiment is present in the futures and options markets. However, there is some data on the demand for too much margin to buy leverage, although it is still too early to call for concern.
The longer Bitcoin stays above $24,000, the more comfortable pro traders are with the current rally. Moreover, bears using the futures market has $ 235 million liquidated between January 15 and January 16, resulting in a decreased appetite for bearish bets. Therefore, the derivatives market continues to favor bullish momentum.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.