Bitcoin has gained 6.5% since hitting a low of $92,458 on December 23, but it has struggled to break past the $98,000 resistance level. Despite the steep 14.5% correction from its all-time high of $108,275 on December 17, traders remain optimistic about Bitcoin’s recovery, signaling a potential rally above $105,000.
Bitcoin Futures Indicate Growing Bullish Sentiment
Data from Bitcoin derivatives markets shows a neutral-to-bullish outlook, suggesting the recent price volatility hasn’t shaken confidence. Futures contracts for Bitcoin are currently trading at a 12% premium compared to the spot market, well above the 5–10% range considered neutral. This reflects strong demand for leveraged long positions, indicating traders expect further price gains.
Similarly, Bitcoin put options (used to sell BTC) are trading at a 2% discount compared to equivalent call options (used to buy BTC). Typically, a 6% premium on put options indicates bearish sentiment, but the current data suggests traders are optimistic about Bitcoin’s near-term performance.
Traditional Market Recovery Supports Bitcoin
The recent recovery in traditional financial markets has also bolstered Bitcoin’s price. The S&P 500 index erased its monthly losses on December 24, while the US 10-year Treasury yield rose to 4.59%, up from 4.23% just two weeks earlier.
Higher Treasury yields often signal rising inflation or increasing government debt, which can devalue fiat currencies and bonds. In such scenarios, scarce assets like Bitcoin and stocks often perform well as investors seek alternatives to protect their wealth.
Challenges Ahead: Economic Uncertainty and Correlation with Stocks
While Bitcoin has shown resilience, concerns about global economic stagnation continue to weigh on its upside potential. Bitcoin’s 64% correlation with the S&P 500 highlights its sensitivity to broader market trends.
The US Federal Reserve has scaled back its interest rate cut forecasts for 2025, reducing its planned cuts from four to two. This move could stabilize corporate earnings and ease fears of a downturn in real estate financing, but it also limits the potential for liquidity injections that typically benefit Bitcoin.
Margin and Derivatives Markets Highlight Bullish Momentum
Analyzing margin markets provides additional insight into Bitcoin’s current sentiment. On OKX, the Bitcoin long-to-short margin ratio is at 25x in favor of long positions. Excessive confidence typically drives this ratio above 40x, while bearish sentiment brings it below 5x. The current ratio signals steady bullish momentum without overconfidence.
Despite record outflows from BlackRock’s iShares Bitcoin Trust ETF on December 24, Bitcoin’s recovery after retesting the $92,458 level on December 23 has reinforced optimism.
Both Bitcoin derivatives and margin markets suggest a strong foundation for a rally. If Bitcoin can overcome the $98,000 resistance level, it could push toward $105,000 in the coming weeks. While economic uncertainty poses challenges, the overall market sentiment remains bullish.
