Despite Bitcoin’s recent rise towards the $70,000 level, data from derivatives markets reveals that investors remain cautious and strong bullish momentum has not yet formed.
Although a price recovery is noticeable in the cryptocurrency market, derivatives indicators suggest that risk appetite remains limited. Although Bitcoin has risen from $60,000 to $70,000, investors appear reluctant to open aggressive long positions.
The ratio of funding paid between long and short position holders in Bitcoin perpetual (futures) contracts remains below zero. A negative funding ratio is considered a bearish signal, indicating that short positions are dominant in the market and that investors are demanding an additional premium to hold long positions. This suggests that despite rising prices, market participants are positioned against downside risks.
Another important indicator of the derivatives market, open interest data, also shows no signs of recovery. According to Coinglass data, the total amount of open interest on Bitcoin perpetual futures fell 51% from its October peak. The lack of a significant recovery in open interest after the decline that began in October indicates that investor confidence has not yet been fully restored.
Andy Martinez, CEO of Crypto Insights Group, said market liquidity and depth have declined significantly since the October 10 stock market crash, adding: “This has led investors to reduce leverage and adopt more conservative strategies. The market is still trying to digest the developments since October 10.”
Options market data paints a similar picture. According to Griffin Ardern, head of research and options at BloFin, Bitcoin’s implied volatility, which was 83% last Thursday, has now fallen to around 60%. This drop indicates that the market does not expect sharp price movements in the short term.
However, positioning indicators remain cautious. The 25 delta call-put bias indicator, which measures the balance between fear and greed in the options market, reveals a strong bias toward puts. This indicates that investors have a strong demand for hedging against downside risks.
Ardern said the impact of leverage on prices has reduced significantly, reducing volatility and stabilizing prices. However, she pointed out that this also means many investors are taking profits or cutting losses to low levels, adopting a wait-and-see strategy or temporarily exiting the market. According to Ardern, markets dominated by bearish sentiment generally indicate a period of horizontal consolidation rather than a rapid recovery.
On the other hand, the busy macroeconomic calendar reinforces caution. Le Shi, managing director of Auros Hong Kong, noted that although the market appears to have found support last week, participants remain extremely cautious due to many potential risk factors.
Shi said political developments in Japan, volatility in the precious metals market, and concerns over AI-driven stock rally are also limiting risk appetite in the crypto market.
*This does not constitute investment advice.
