Bitcoin investors are exercising caution, displaying a sense of ‘disbelief’ near the all-time highs, while Ethereum traders are aggressively leveraging their positions, according to market experts. This week, Bitcoin made a comeback towards $110,000, recovering from last week’s dip to $100,500, sparked by a dispute between Trump and Musk. Regardless of the near-record highs, Bitcoin traders are maintaining caution as funding rates turn negative, a sign of skepticism.
As macroeconomic uncertainties increase with the approach of today’s CPI data release and next week’s Federal Reserve meeting, this cautious stance might just position the market for the next big move, suggests K33. The research head at K33, Vetle Lunde, in his latest report, highlighted that Bitcoin funding rates and leverage indicators across various platforms demonstrate continued caution. Negative daily funding was observed for BTC/USDT perpetuals on Binance last Friday and Sunday, while weekly funding rates were merely 1.3% annualized, a level only seen at local bottoms in the past two and a half years.
History suggests that Bitcoin does not peak during times of negative funding; instead, these situations are typically followed by more upside, Lunde pointed out. The risk aversion extends to futures markets as well. The Volatility Shares 2x leveraged long Bitcoin ETF, BITX, currently holds just 52,435 BTC in exposure, significantly lower than its December peak of 76,755 BTC. The absence of leveraged inflows and soft funding hints at investor skepticism, a setup that could potentially drive Bitcoin’s next rally, according to Lunde.
On the other hand, Ethereum traders are actively leveraging. The Volatility Shares 2x leveraged Ethereum ETF is playing a dominant role in the ETH derivatives market, commanding a significant share of both U.S. Ethereum ETF flows and CME’s ETH open interest over the past two months. Since April 8, the fund has added 305,100 ETH in exposure, outpacing the 295,250 ETH increase in CME ETH OI during the same period. This influx indicates a craving for leverage on long ETH exposure that is yet to be seen in Bitcoin markets, Lunde observed.
Kraken’s Head of Derivatives, Alexia Theodorou, concurs with this perspective, albeit highlighting the potential volatility. She noted an all-time high of 30,000 ETH in open interest in ETH perpetuals on Kraken this week, indicating a significant increase in speculative activity around Ethereum. However, traders seem to be bracing for volatility rather than expressing strong convictions about ETH’s short-term price direction. Recent positive signals from U.S. regulators regarding a more innovation-friendly approach to DeFi could act as a structural boost for ETH in the forthcoming months, she added.
Ethereum has gained 5.4% over the past week, trading around $2,766, but it is still about 43% down from its all-time high. The Block, an independent crypto news outlet, provided this information, and it should be noted that Foresight Ventures, a major investor in The Block, also invests in other crypto-related companies.
