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Key derivatives metrics and ETF flows indicate a lack of demand, but macroeconomic factors provide encouragement.
What to know:
- BTC‘s implied volatility has significantly decreased from February 6 peaks, indicating a reduction in market anxiety.
- Critical derivatives indicators and ETF inflows imply a lack of demand.
- Macroeconomic elements and inflation-adjusted yields offer optimism for bullish investors.
Bitcoin is facing difficulties in generating upward momentum, despite the key indicator of market fear retracting from its early-month peak and suggesting possible stability.
Bitcoin’s 30-day implied volatility, a measure of market fear reflecting anticipated price fluctuations over a month, has fallen to an annualized 52%, according to data from Volmex. This decline has reversed the early-month surge, which saw the index rise from approximately 48% to nearly 100% as bitcoin plummeted to around $60,000.
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The declining volatility indicates that panic has subsided and that investors are no longer pursuing options or hedging instruments as urgently as they did during the downturn.
Options are derivative contracts that provide protection against price fluctuations. A call option allows for profit from upward price volatility in BTC, while a put option safeguards against price declines. The demand for options affects implied volatility.
“Implied volatility has decreased, and deleveraging is losing momentum,” analysts at Bitfinex remarked in an email to CoinDesk, highlighting the newfound stability and diminishing panic.
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However, Bitcoin’s price continues to be under pressure, remaining just below $68,000 at the time of writing, reflecting a 1.2% decline over the past 24 hours, according to CoinDesk data. The early-month sell-off waned near $60,000 on February 6, initiating a recovery, but prices have not consistently exceeded $70,000 since.
This suggests weak demand.
“Funding rates have yet to indicate a desire for aggressive re-leveraging, and derivatives markets support the perspective of stabilization rather than renewed buying,” Bitfinex analysts clarified.
Perpetual funding rates are periodic payments made between long and short traders in cryptocurrency perpetual futures contracts to keep the contract price aligned with the spot price. A positive rate indicates that longs (buyers anticipating price increases) compensate shorts (sellers betting on declines), suggesting a more bullish market positioning. A negative rate implies a preference for short positions.
While implied volatility has decreased sharply, funding rates in BTC perpetuals remain slightly above zero, indicating mild bullish tendencies among traders, but without significant aggression so far.
Institutional interest has also been lacking. U.S.-listed spot bitcoin exchange-traded funds have recorded a net outflow of $677.98 million this month, continuing a three-month streak of redemptions, based on data from SoSoValue.
Macro offers hope
Struggling bulls can find hope in the declining U.S. inflation and reduced real yields, which may provide support for risk assets and non-yielding assets like bitcoin.
Data released last week indicated that the consumer price index (CPI) slowed to 2.4% year-on-year in January from 2.7% in December, bolstering expectations for at least two 25 basis-point rate reductions by the Federal Reserve this year.
The real or inflation-adjusted yield on the U.S. 10-year Treasury note has fallen to 1.8%, the lowest level since December 1. A decrease in real yield typically encourages investors to increase their exposure to assets such as bitcoin.
“Lower real yields diminish the relative carry disadvantage of non-yielding assets like Bitcoin, while a softer dollar enhances global liquidity conditions,” noted analysts at Bitfinex.
