Bitcoin price rally fails to turn derivatives traders bullish, here’s what to expect

• Bitcoin and Ethereum prices on spot exchanges have risen considerably, but investor expectations in derivatives markets have not improved. 
• BTC price resumed its uptrend in the absence of macro uncertainty, and altcoins are following the largest asset by market capitalization in its rally. 
• In the options market, the rise in implied volatility has significantly lagged behind prices, despite BTC price's rebound to $24,600. 

Bitcoin’s positive correlation with tech-heavy Nasdaq has broken down: despite a decline in US stocks, BTC has rebounded, wiping out its losses from the past week. Investor sentiment in the derivatives market has yet to improve, however, and is out of sync with the rally. 

Also read: Binance becomes SEC’s latest target after Kraken, Coinbase and Paxos, but markets remain strong

Bitcoin derivatives traders expectations remain damp, despite recent BTC rally

Bitcoin price  rebounded to the $24,600 level on spot exchanges, uncoupling from other risk assets such as US stocks, which  declined. This comes as a surprise since Bitcoin’s correlation with the Nasdaq recently turned positive, climbing to 0.74 for the first time in four months. 

The Bitcoin spot market rally failed to improve investor expectations. While Bitcoin and Ethereum prices have risen considerably since February 14, investor sentiment in the derivatives market remains damp. 

In the absence of macroeconomic uncertainty, Bitcoin price is reverting to its previous uptrend, printing its weekly high of $24,600 on February 16. With BTC’s recent price surge, cryptocurrencies with large market capitalization and altcoins followed the asset’s upwards trajectory. 

In the options market, the rise in Implied Volatility (IV) has lagged behind BTC’s spot price rally. IV reflects the market’s view on the likelihood of future movements in Bitcoin prices. Since IV has a predictive nature it serves as a useful tool in gauging the overall market condition. 

BTC volatility chart

With the rise in IV lagging behind price growth on spot exchanges, volatility is relatively muted and this could mean that BTC’s price fluctuations could remain contained. 

Bitcoin on spot exchanges is on track to the $25,000 target

Bitcoin price plummeted to the $21,000 level on February 13 but the asset recently wiped out its losses and made a comeback above $24,600. 

Despite the pervasive FUD in the crypto market surrounding US Dollar-pegged stablecoins and “staking” services provided by exchanges, BTC yielded 11.6% gains overnight, since February 15. 

BTC/USD price chart 

As seen in the chart above, Bitcoin price is in an uptrend and the asset wiped out its losses from the second week of February, climbing above the $24,500 level. The asset is close to its 61.8% fibonacci retracement at $25,967 on its 12H price chart. This is the next bullish target for Bitcoin. 

The Relative Strength Index (RSI), a momentum indicator reads 81.48, meaning BTC is overbought. It is important to note that the asset hit this level in the first two weeks of January and yet continued its price rally. If the bullish momentum is maintained, BTC could hit its target and cross the key level of $25,000 in the short-term. 

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