Bitcoin rises toward its all-time high as futures markets show interest from bulls

Bitcoin (BTC) is trading less than 5% below its all-time high of $109,500, yet demand for leverage in perpetual contracts remains balanced between longs (buyers) and shorts (sellers). At first, this might seem concerning, but it does not necessarily increase the likelihood of a correction below $100,000.

Exchanges charge either longs or shorts to compensate for imbalances in leveraged demand. In a well-balanced market, the 8-hour funding rate hovers near zero, which has been the case for the past few weeks. Periods of heightened excitement can push this rate above 0.20%, equivalent to 1.8% per month.

Spot Bitcoin ETFs and corporate adoption reduced retail investors’ influence

The launch of spot Bitcoin exchange-traded funds (ETFs) and the growing adoption of BTC reserves by corporations have diminished the influence of retail investors. For context, the spot BTC ETFs collectively hold 6.7% of the total Bitcoin supply, while companies such as MicroStrategy, MARA Holdings, Tether, Tesla, and Coinbase control an additional 4.3%.

Institutional demand for Bitcoin futures has surged, leading the Chicago Mercantile Exchange (CME) to capture 85% of the monthly futures market. Meanwhile, cryptocurrency exchanges like Binance, Bybit, and OKX continue to dominate perpetual contracts, the preferred instrument among retail traders. This shift highlights the declining influence of retail participation in Bitcoin price discovery.

CME’s $18.6 billion open interest in monthly BTC futures has become a critical benchmark, offering global hedge funds and investment banks a regulated gateway to gain exposure to Bitcoin. The instrument facilitates both long and short positions while ensuring liquidity and access to leverage.

Similarly, the launch of spot Bitcoin ETFs in early 2024 introduced a new class of investors, including pension funds, wealth managers, and retirement savings accounts. These instruments have surpassed $120 billion in assets under management (AUM), enhancing market liquidity, improving price discovery, and supporting the development of ETF options listed on the NYSE, CBOE, and Nasdaq.

While spot Bitcoin ETFs are not directly tied to Bitcoin’s price, the success of MicroStrategy’s stock and debt offerings has created an alternative liquidity channel. This has lowered barriers for investors unable to hold spot Bitcoin ETFs, as seen in the recent $500 million investment by Norway’s sovereign wealth fund.

Rather than focusing solely on futures demand, traders should analyze the Bitcoin options market to gauge professional sentiment on potential downturns. The 25% delta skew metric (put-call ratio) typically ranges between -6% and +6% in neutral markets, moving below this range in bullish conditions.

Between Jan. 21 and Jan. 27, whales and market makers displayed optimism regarding Bitcoin’s price, but sentiment became more balanced after BTC retested the $98,000 support level. Currently, the -5% delta skew reflects a moderate level of optimism, indicating a favorable environment for potential Bitcoin price appreciation.

However, excessive confidence can be a warning sign, as routine price corrections often lead to liquidations. Some of the hesitation among investors as Bitcoin approaches its all-time high stems from US President Trump’s self-imposed Feb. 1 decision to implement 25% import tariffs on Canada, Mexico, and China.

Related: Bitcoin’s February momentum hinges on next week’s labor market data

Additionally, concerns over slowing revenue growth among major global corporations, particularly Apple, have contributed to uncertainty. The rise of China’s DeepSeek AI model has intensified doubts about US tech sector capital expenditures. As a result, Bitcoin investors are wary of a broader economic slowdown, which could favor cash positions and short-term government bonds.

Ultimately, the lack of excessive bullish sentiment in Bitcoin derivatives is not a sign of weakness but rather a reflection of broader market caution beyond the cryptocurrency sector.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.