Bitcoin Price Surpasses $61,000, But Investors Still Prefer Stocks and Bonds

Bitcoin (BTC) has gained 21% since retesting the sub-$50,000 level on August 5, but the price has struggled to hold above $62,000. Meanwhile, the S&P 500 has fully recovered and is currently trading just 1% below its all-time high set on July 16.

Bitcoin is facing several conflicting trends, including derivatives indicators that reflect low buyer interest and macroeconomic indicators that suggest traders are increasingly moving out of cash positions. Interestingly, this stock market rally coincides with a significant decline in U.S. Treasury yields, indicating strong demand for these traditionally safe haven products.

In essence, traders are now willing to accept lower yields on fixed income assets, which likely reflects growing confidence in the Federal Reserve’s strategy to keep inflation in check without triggering a recession. The Fed is widely expected to cut rates on September 18 after holding rates above 4% since December 2022.

Ahead of economic uncertainty, investors are looking at stocks and bonds

Strong demand for government bonds, generally considered the safest asset class, does not necessarily mean confidence in the purchasing power of the US dollar. If investors begin to perceive that the US government’s fiscal position is unsustainable due to its ever-increasing debt, their first reaction will likely be to seek protection in safer assets. If this scenario unfolds, Bitcoin investors may have reason to be moderately concerned in the short term, despite the generally bullish long-term outlook.

The US Dollar Index (DXY) recently plunged to its lowest level since December 2023, losing its strength against other major global currencies. Some analysts suggest that the DXY is inversely correlated with the price of Bitcoin, partly because Bitcoin’s appeal lies in its independent payment processing capabilities and fully transparent economic model.

Historical data shows that the inverse correlation between the DXY index and Bitcoin has been evident in the past, but in recent months this relationship has weakened, with correlations fluctuating between -40% and +40%. This recent volatility reduces the statistical strength of the inverse correlation claim. However, the lack of a clear correlation does not completely rule out the possibility that Bitcoin price will reclaim the $72,000 level.

Likewise, the recent rise in the S&P 500, which may seem counterintuitive, actually reflects widespread investor distrust in holding cash positions. This sentiment is inherently positive for Bitcoin’s prospects. The largest global companies are highly profitable, offering potential dividends or stock buybacks. This factor makes them an effective hedge, especially considering the significant cash reserves held by tech giants.

Bitcoin derivatives indicators show resilience and potential price upside.

Analyzing the BTC futures price is essential to gauge how professional Bitcoin investors are positioning themselves. Under normal market conditions, monthly contracts should trade at an annual premium of 5% to 10% over the spot market, which compensates for the long settlement period associated with futures.

The Bitcoin futures premium has recently fallen to 6%, the lowest level since October 2023. This is still within the neutral range, but bordering on bearish territory. This is a stark contrast to late July, when the premium was over 10% as Bitcoin prices surged above $68,000.

To see if this movement is limited to the futures market, we should also look at the BTC options data. In a neutral market, the imbalance between call (buy) and put (sell) option prices should not exceed 7% in either direction. If traders are increasingly bearish, the demand for put options will increase, pushing the option skew indicator above +7%.

relevant: Two Key Bitcoin Indicators Show Steady Bullish Cycle – ‘No Bubble’ in sight

In contrast to the futures market, demand for both call and put options is currently balanced, as evidenced by the delta skew. This has been the case over the past few weeks, suggesting that professional traders are not particularly concerned about Bitcoin’s ability to reclaim the $62,000 level. It is more likely that traders will not increase their exposure to cryptocurrencies ahead of the Fed’s September decision.