Bitcoin bulls aim for $72K after BTC futures premium hits a 5-week high
2024.07.22 17:20
Bitcoin (BTC) price rose to its highest level in 40 days on July 22, reaching a $68,518 intraday peak. The 19.4% gains in 10 days were fueled by investors becoming more confident in the United States Federal Reserve cutting interest rates in 2024, the end of Bitcoin selling from the German government, and a more constructive regulatory view, especially in the US.
The bullish momentum led the Bitcoin futures premium, the primary gauge of professional traders’ sentiment, to its highest level in five weeks. Traders now question whether the scenario favors a rally to $72,000 despite the uncertainty from US presidential elections and global socio-political turmoil.
President Biden’s election decision has limited impact on Bitcoin price
President Biden’s choice to dropout of the reelection bid on July 21 increased the likelihood of former President Donald Trump for and his crypto-friendly Vice President pick JD Vance winning the upcoming election. Vance, had previously disclosed holdings of up to $250,000 in Bitcoin and voted in favor of a joint resolution to overturn a regulation that aimed to classify crypto holdings as a liability on banks’ balance sheets.
Regardless of how crypto friendly a potential Trump cabinet could be in 2025, investors are also aware of the independence of the US Federal Reserve (Fed) and the US Securities and Exchange Commission (SEC). Fed Chair Jerome Powell’s second term is set to end in May 2026, while Gary Gensler, the current Chair of the SEC, has a five-year mandate set to end in April 2026.
While investors are confident that the Fed will keep interest rates unchanged at 5.25% on July 31, there has been a considerable shift in year-end expectations. According to the CME FedWatch tool, which uses US Treasury yields pricing models, the market presently estimates 47% odds of two interest rate cuts by the Dec. 18 meeting, up from 20.5% one month prior.
China, the world’s second-largest economy, also faces uncertainties as investors were disappointed with the regime’s lack of short-term economic stimulus announcements, as reported by Bloomberg. The People’s Bank of China cut the seven-day reverse repo rate for the first time in twelve months on July 22, to 1.7% from 1.8%. Reportedly, Morgan Stanley economists deemed the move “reactive” and a “risk” to their growth estimates for the region.
Bitcoin derivatives suggest $72,000 is possible
To understand how these circumstances affected Bitcoin investors’ risk appetite, one should analyze the BTC monthly futures contract premium. The price on these derivatives tends to differ significantly from regular spot Bitcoin exchanges, unlike perpetual futures (inverse swaps). Typically, a 5% to 10% premium is expected to compensate for the longer settlement period.
Bitcoin 2-month futures annualized premium. Source: Laevitas.ch
The Bitcoin futures premium rose to 13% on July 22, marking the highest level in five weeks. Although it is below the 16% level from June 7, the current premium indicates a cautiously optimistic sentiment. This is crucial to avoid cascading liquidations if unexpected negative price swings occur.
To determine if this sentiment is present solely in the futures markets, one should analyze the Bitcoin options’ 25% delta skew, which measures the relative demand for call (buy) and put (sell) options. A negative skew indicates higher demand for call options, and neutral markets typically hold a -7% to +7% delta skew, indicating balanced pricing between the two instruments.
Related: Gary Gensler will likely resign in 2025 after Biden exit — 10x Research
Bitcoin 2-month options 25% delta skew. Source: Laevitas.ch
Bitcoin’s 25% delta skew metric has remained stable near -9% since July 19, suggesting traders are slightly optimistic about short-term price movements. The last time Bitcoin options showed similar signs of confidence was on May 20, but this was short-lived as the $71,500 resistance proved difficult to overcome.
The latest data points to a healthy Bitcoin bull market aiming for a retest of the $72,000 level. Demand is driven by a mix of factors, including geopolitical uncertainty, confidence in less restrictive central banking economic policies, and a more constructive view of crypto regulation after the SEC dropped major cases and investigations.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
