Bitcoin’s three-month futures basis has seen an uptick, indicating a rise in derivatives activity. A CEO highlights that retail users are “buying the dip” while maintaining resilient balances. It was informed that retail usually enters the market late and experiences the most significant losses during unwinds. Traders are ramping up leverage once more, despite Bitcoin continuing its sideways movement and ongoing risks in the broader crypto market. The leading cryptocurrency has remained within the range of $62,000 to $71,000 since February 6, showing no significant attempts at a breakout. Despite the market’s fluctuations, investors continue to pour in, ramping up their leverage and anticipating a breakout rally. “The increase in retail activity signals growing speculation and leverage buildup that frequently comes before volatile crypto movements,” Nick Ruck shared.
The annualized three-month futures basis on major centralized exchanges, including Binance, OKX, and Deribit, has seen an increase from around 1.5% to 4% since February 13, according to data. The metric assesses the disparity between the derivatives and spot price. An expanded gap indicates that futures are trading at a premium over spot prices, signaling a resurgence of speculative interest in the market as traders show a growing willingness to pay extra for long positions. Aggregated funding rates have been on the rise since February 13, suggesting that long-position speculators are gaining a stronger foothold in the market. Both metrics indicate a transition that suggests the market is slowly reclaiming its risk-on stance following weeks of ambiguity. “Retail users on Coinbase have been very resilient during these market conditions,” Brian Armstrong tweeted Sunday. He noted that investors have been “buying the dip,” with a “vast majority of customers” experiencing their “native unit balances in February equal to or greater than their balances in December.” Options markets convey a comparable narrative, yet suggest a more cautious perspective.
Bitcoin is showing indicators that have historically signaled significant turning points in previous cycles; however, these are not yet the types that usually precede a lasting bottom. Multiple on-chain indicators indicate that the market is currently caught between a mid-cycle correction and a more significant reset, while investors continue to discuss whether the worst has already been factored in. Long-Term Holder capitulation, Market Value to Realized Value, Net Unrealized Profit/Loss, and the percentage of supply in profit are critical metrics to analyze market sentiment and investor behavior. The 25 Delta skew, which gauges the demand for puts relative to calls, has shown a consistent decline since February 13, dropping from -10 to -4, as reported. The improvement suggests a decline in the need for downside protection or bearish positions, potentially reflecting an increase in bullish sentiment. “We expect short-term potential for a leverage-driven rally and short squeezes, especially if broader risk assets hold steady,” Ruck stated. “Retail typically enters late and suffers the most on unwinds,” the LVRG expert explained, suggesting that “this setup may mark a near-term bottom, but only after the inevitable over-leveraged shakeout occurs.”
Despite the current market sentiment showing signs of positivity, it has not yet been “supported by sufficient trading volume,” as stated by Ryan Yoon. “This disconnect creates a high-risk environment where any sudden downside could lead to a final, mass surrender of interest,” Yoon stated in an interview. With investors nearing their breaking point, another forced liquidation could completely snuff out any remaining hope, resulting in a “total exodus from the market,” an analyst stated. “We are at a critical juncture where the line between a healthy recovery and complete investor apathy is becoming dangerously thin.” Bitcoin has experienced a decline of nearly 2.5% in the last 24 hours, currently trading at $68,600, as reported.