Bitcoin derivatives hint at potential rally above $73K — New all-time highs next

Bitcoin derivatives data suggests room for additional price upside in the coming weeks as Ethereum ETF approval chances rise.

Bitcoin (BTC) has experienced a significant surge, gaining 8.5% within 24 hours to reach $71,926 on May 21. This move places Bitcoin just 2.5% shy of its all-time high. Moreover, BTC derivatives are showing favorable conditions for breaking new all-time highs in the weeks ahead.

The 4% daily jump in BTC price appears to be spurred by growing optimism around the approval odds of a U.S. spot Ethereum exchange-traded fund (ETF) and a general market trend seeking inflation protection. This trend has also propelled gold and the S&P 500 to new all-time highs on May 20.

Many traders wonder whether the recent price surge in Bitcoin was driven by excessive use of leveraged long positions and what the implications of a spot Ether (ETH) ETF are.

Regulator’s stance shifts after U.S. Senate overrule

Senior Bloomberg ETF analyst Eric Balchunas raised the approval odds for the Ethereum spot ETF from 25% to 75% on May 20, influenced by political pressure. This adjustment followed a pivotal May 16 resolution by the U.S. Senate that overturned the SEC’s Bulletin 121, which had imposed stringent capital requirements on banks holding customer digital assets.

Before the Senate’s vote, President Biden had indicated he might use executive power to veto any resolution that would reverse the SEC’s policy.

However, the Senate’s decision favoring cryptocurrency adoption prompted a strategic reevaluation at the White House, according to Perianne Boring, the founder and CEO of the Blockchain Trade Association Digital Chamber.

The SEC’s chair, Gary Gensler, had previously shown considerable reluctance to classify Ethereum as a non-security or to hint at any likelihood of approving its spot ETF.

But the landscape shifted dramatically on May 20 when the SEC reportedly requested updates to the spot Ethereum ETF filings from exchanges like NYSE and Nasdaq.

Despite potential competition from Ethereum, the introduction of its spot ETF is likely to be broadly beneficial for the cryptocurrency sector, fostering a more favorable environment for investment.

The diminishing anti-crypto regulatory stance in the U.S. could encourage more investment managers, including pension funds, to adopt a more favorable view of the sector. Historically, regulatory uncertainties, whether targeting mining operations or privacy-centric intermediaries, have adversely affected Bitcoin’s price.

Bitcoin derivatives are moderately bullish

The rise in Bitcoin’s value on May 21 also triggered an increase in demand for BTC long positions through monthly futures. In typical market conditions, these derivatives carry a premium of 5% to 10% over the spot price to compensate for their extended settlement periods.

Data shows that the BTC futures premium has climbed to 14%, the highest in five weeks. This indicates moderate bullish sentiment, contrasting sharply with the situation on April 1, when the futures premium hit 25%—a level usually indicative of extreme market optimism.

Examining the options market is insightful in understanding the dynamics at play further. The 25% delta skew helps gauge the influence of leverage on recent price trends. A market excited about rising prices typically will see a -7 % skew as put (sell) options become cheaper.

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The current -8% skew in Bitcoin options markets reflects a healthy market sentiment, especially considering that the BTC price has increased by 23% in 19 days while the options market has remained relatively stable.

The Bitcoin derivatives market data suggests that there is still room for strategic leverage among Bitcoin buyers without the fear of excessive optimism, which could lead to significant liquidations during unexpected price drops. This offers a promising outlook for more upside for BTC prices in the weeks ahead, with a possibility of breaking new all-time highs above $74,000.

According to popular crypto analyst Game of Trades, the bullish momentum could catapult Bitcoin up to $80,000 given “key moving averages” and “channel support.”

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.