ZyCrypto 2025-03-17 11:39:43

Derivatives Markets Bullish for Bitcoin, News of Future Rate Cut may Compel Traders to buy BTC at a Discount

Bitcoin options markets flashed a bullish signal as calls outnumbered puts. The call-to-put open interest ratio is one way to ascertain whether the market is bullish. The call open interest stood at roughly 11,800 contracts, while the put open interest stood at approximately 8,500 contracts. This means that more traders are betting on Bitcoin’s price rise. A concentration of put contracts at the $75k to $85k level may indicate hedging behaviors, which could result in higher volatility and further price drops. The hedging behavior is a cause for concern because Bitcoin could take many different turns. Traders may not have a clear target at this point, prolonging a sideways action, or if Bitcoin fails to break above $90k, the price may suffer more lows shortly. Traders would be, for the most part, waiting for a breakout in either direction. The Bitcoin basis rate, the premium of monthly contracts over spot markets, is in healthy territory after briefly signaling bearish sentiment. The current basis rate is 5%, lower than the 8% recorded earlier. However, the 5% to 10% range is generally accepted as bullish territory, as a premium to compensate for more extended periods of waiting for a trade. The drop from 8% to 5% could be a neutral signal, suggesting a sideways action. With the derivatives market showing signs of a bullish recovery, traders will be watching for key levels indicating recovery, particularly with resistance and support levels. Bitcoin margin markets can supplement an analysis of Bitcoin derivatives. Margins allow traders to borrow stablecoins to buy Bitcoin. Also, traders can borrow Bitcoin to buy stablecoins, thus shorting the price. Derivatives, on the other hand, always have a balance between longs and shorts. The Bitcoin long-to-short ratio on OKX shows longs outweighing shorts by 18x. Typically, a ratio above 40 means overconfidence, whereas under 5 means bearish territory. Federal reserves from developed countries financed their treasuries during the pandemic, post-lockdown, injecting some of the largest amounts of fiat money since the subprime crisis. The current state of Bitcoin is partly a result of this increase in fiat currency and the aftereffects of inflation. As a result, interest rates increased to control inflation. In 2024, with inflation showing signs of weakening, interest rates were lowered once again. Bitcoin’s rally occurred over fears about America’s trade war policy and potential deep disturbances to global markets. Retaliatory measures by Canada and China only fuelled Bitcoin’s rise because traders were hedging against further price volatility. Moreover, this week’s inflation data only strengthened traders’ expectations of a rate cut because Core CPI slowed to 3.2% while CPI data showed only a 0.3% rise over February. These moderating effects indicate a possible rate cut in June if inflation continues to soften. Derivatives traders have likely already priced in the strong likelihood of a rate cut in June and have reason to expect a bullish Bitcoin run. However, if inflation strengthens, Bitcoin may suffer further drops to lower levels. Next week’s Federal Reserve meeting will be a key driver for Bitcoin traders, who will pay attention to Powell’s comments on the prospects of monetary policy. If there is an indication of a rate cut, Bitcoin traders may seize the opportunity to buy the token at a discount. However, if there is less confidence in a rate cut, traders may see this as a sign of a sideways movement until the reserve signals better prospects.

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