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Bitcoin has recently reached $58,000, pushing the majority of the cryptocurrency market into a state of euphoria. This bullish trend, marked by a demand-driven rally, was fueled by substantial spot ETF volumes surpassing $3.2 billion and net inflows of $520 million. However, the question arises: Is this growth sustainable, or are we on the verge of a retreat to the $50,000 level?
The recent surge was propelled not only by genuine demand but also by the cascading effect of short liquidations and a speculative buying surge. The resulting escalation in funding rates on native exchanges and a pronounced upswing in longer-end futures, which traded at a premium of up to 16% over spot prices, underscored the frenetic pace of the rally.
On the options market, the response to this bullish run was initially subdued, with noticeable profit-taking among call option holders and rising demand for downside protection. This activity resulted in risk reversals hovering around 3%, a figure that belies the magnitude of the spot market's movement.
As Bitcoin's price continued its growth, volatility demand increased, though spikes were met with selling pressure, suggesting a market that is cautious about over-extension. With the realized volatility maintaining a level near 40%, the market eyes the $60,000 mark as a potential target for the March expiry.
Looking ahead, the sustainability of this rally is in question. Overheated funding rates may signal a looming correction, potentially washing out leveraged positions and drawing Bitcoin back to the $50,000 support level. Conversely, if the inflow into the spot ETFs maintains its momentum, we could see the uptrend persist as the market anticipates the Bitcoin halving event.
Investment strategies in this climate should be approached with caution. Accumulators have proven to be a wise choice, previously enabling clients to acquire Bitcoin at a 24% discount to the spot rate. Additionally, implementing Unconditional Fixed Coupon Convertibles (UFCC) could provide a yield on long Bitcoin positions, irrespective of price fluctuations.
Alex Dovbnya
Yuri Molchan
Vladislav Sopov
