Data highlights Bitcoin could rise to $40,000 amid global economic turmoil

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Bitcoin It has been trading within a tight 4.5% range for the past two weeks, showing some consolidation near the $34,700 mark.

Although prices have stagnated, the 24.2% gain since October 7 has built confidence, driven by the impact of the upcoming 2024 halving and the possibility of a Bitcoin fund spot ETF being approved in the United States.

Investors worry about gloomy global economic outlook

Bears expect further macroeconomic data to support a global economic slowdown as the Federal Reserve keeps interest rates above 5.25% to curb inflation. For example, on November 6, China’s exports in October fell by 6.4% year-on-year; Germany announced on November 7 that industrial output in October fell by 1.4% month-on-month.

Although major oil producers may cut supply, weak global economic activity caused WTI oil prices to fall below $78 for the first time since late July. Comment On November 6, Neel Kashkari, President of the US Federal Reserve Bank of Minneapolis, created a bearish trend, triggering a “turn to quality” reaction.

Kashkari said:

We haven’t quite solved the inflation problem yet. We still have a lot of work to do to get it done.

Investors sought the safety of U.S. Treasuries, causing the 10-year Treasury yield to fall to 4.55%, the lowest level in six weeks. Oddly, despite expectations amid a global recession, the S&P 500 stock market index hit 4,383 points, its highest level in nearly seven weeks.

This phenomenon may be due to the fact that companies in the S&P 500 index hold a combined $2.6 trillion in cash and cash equivalents, providing some protection if interest rates remain high. Despite the increasing participation of large technology companies, the stock market offers scarcity and dividend yields that match investor preferences in uncertain times.

Meanwhile, Bitcoin futures open interest reached its highest level since April 2022, reaching $16.3 billion. The milestone is significant as CME solidifies its position as the second-largest Bitcoin derivatives market.

Healthy demand for Bitcoin futures and options

The use of Bitcoin futures and options has been making headlines in the media recently. Investors believe the two most bullish catalysts for 2024 could drive demand for leverage: the potential for a spot BTC ETF and the Bitcoin halving.

One way to gauge the health of the market is to examine Bitcoin contango, which measures the difference between the two-month futures contract and the current spot price. In strong markets, annual premiums (also called basis) are typically in the 5%–10% range.

Annual premium (basis) for the 2-month Bitcoin futures contract.Source: Lavitas

Note that this metric has reached its highest level in more than a year at 11%. This suggests that strong demand for Bitcoin futures is primarily driven by leveraged long positions. If the opposite were true and investors bet on a fall in Bitcoin prices, the premium would remain at 5% or less.

Another piece of evidence can come from the Bitcoin options market, comparing the demand between calls (buying) and puts (selling). While this analysis does not cover more complex strategies, it does provide a broad context for understanding investor psychology.

BTC options 24-hour order volume ratio.Source: Lavitas

Over the past week, the indicator averaged 0.60, reflecting a 40% call (buy) bias. Interestingly, Bitcoin options open interest has increased by 51% in the past 30 days to $15.6 billion, and this growth has also been driven by bullish instruments, as shown by Big Data call options trading volume.

As Bitcoin prices hit an 18-month high, there is likely to be a degree of skepticism and hedging. However, current conditions in the derivatives market indicate healthy growth and no signs of over-optimism, which is consistent with a bullish outlook for prices reaching $40,000 or higher by the end of the year.

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