By Chris Hollingworth 
Bitcoin has been facing challenges in surpassing the $105,000 mark amidst macroeconomic headwinds in the United States. Despite this, steady inflows from institutional investors and the resilience of the $100,000 support level indicate a growing confidence in the cryptocurrency.
Since May 10, Bitcoin (BTC) has been struggling to break above $105,000, causing some traders to question the strength of the previous bullish momentum. Although BTC managed to reclaim the $104,000 level, there has been a noticeable decrease in demand for leveraged long positions, as evidenced by the decline in the Bitcoin futures premium.
On May 14, the annualized Bitcoin futures premium hit a peak of 7%, but subsequently dropped to 5%, nearing a neutral-to-bearish threshold. This decline in demand for leveraged bullish positions seems to be tied to broader macroeconomic uncertainty, with Bitcoin’s price closely tracking movements in the stock market.
The reversal of early weakness in S&P 500 futures on May 15 coincided with Bitcoin’s rebound from $101,800 to $104,000. Investors appear to be more confident in the prospect of the US Treasury injecting liquidity following warnings from Federal Reserve Chair Jerome Powell regarding potential “supply shocks” that could impact interest rates.
Additionally, signs of economic weakness have emerged, such as the April Producer Price Index report showing a 0.5% decrease from the previous month, contrary to economists’ expectations of a 0.2% increase. Ongoing global trade tensions, particularly the temporary nature of the US-China tariff agreement, have also contributed to limited investor risk appetite.
Demand for fixed income has risen, leading to a drop in the yield on the 10-year US Treasury to 4.45% after peaking at 4.55% on May 14. Historically, Bitcoin tends to perform better when government bond yields are on the rise, indicating reduced confidence in the Treasury’s debt management capabilities.
To gauge whether traders are shunning leverage or actively betting on a price decline, analyzing Bitcoin options demand is crucial. Despite bearish sentiments typically pushing the BTC delta skew indicator above 6%, Bitcoin put options have been trading at a discount compared to call options, demonstrating strong confidence in the $100,000 support level.
The article highlights the importance of macroeconomic trends, particularly those related to the US Federal Reserve’s balance sheet and recession risks, in determining Bitcoin’s ability to surpass $105,000. The cryptocurrency’s high correlation with the S&P 500, which usually lasts no longer than two months, plays a significant role in this context.
Noteworthy is the net inflow of $320 million into US Bitcoin exchange-traded funds (ETFs) on May 14, indicating sustained institutional demand. This shift in perception of Bitcoin from a risk-on asset to a non-correlated instrument may reduce the likelihood of sharp price corrections, even in the absence of strong leveraged bullish positions.
Please note that this article is for general informational purposes only and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect or represent any specific views or opinions.
