Bitcoin’s performance has taken a notable turn as it recovers from a recent dip, now hovering around $110,000. This resurgence follows a wave of tension stemming from political events, yet traders appear cautiously optimistic despite the asset nearing its previous peak.

Market analysts express concern over a feeling of “disbelief” that permeates current trading environments. Traders are treading carefully, usually a sign that they are weighing the risks linked to upcoming economic indicators.

Recent findings from a K33 Research report highlight a lack of bullish sentiment in the derivatives sector. Evidence of negative funding rates, coupled with stagnant leveraged inflows, underscores a cautious marketplace.

This phenomenon indicates that the rally is less about speculation and more about genuine market demand. Historically, Bitcoin does not typically peak during phases of negative sentiment and minimal trading positions, hinting at the potential for substantial upward movement.

Indicators of Conservative Trading in Bitcoin

Vetle Lunde, K33’s Head of Research, observed that negative daily funding rates were noted on Binance’s BTC/USDT perpetual contracts on both Friday and Sunday, reflecting an annualized weekly funding average of only 1.3%. This trend usually appears near local price bottoms.

In these scenarios, traders tend to pay to maintain their short positions, indicating a cautious outlook despite recent upward movements. Lunde suggested that such bearish attitudes could ignite future bullish breakouts.

Moreover, insights from the Volatility Shares 2x leveraged Bitcoin ETF (BITX) reveal a drop in holdings to merely 52,435 BTC, a significant decrease from its December peak of 76,755 BTC.

Unlike prior rallies seen in March and November 2024, BITX’s inflows have plateaued over the last month, which implies traders are hesitant to embrace aggressive leveraged exposure. Situations like this could lead to surprising upwards shifts in the market if sentiment begins to change.

Ethereum Derivatives Experience a Surge as ETF Activity Rises

While Bitcoin trades with caution, Ethereum markets are witnessing a notable increase in speculative behavior. The Volatility Shares 2x leveraged Ethereum ETF (ETHU) is emerging as a key player in the ETH derivatives landscape.

K33’s findings indicate that since April 8, ETHU’s positions have surged, adding over 305,000 ETH in exposure, surpassing the growth in CME ETH open interest during the same timeframe.

ETHU now commands 18.3% of all ETH held by US spot ETFs and accounts for roughly two-thirds of CME’s total ETH open interest. In comparison, BITX constitutes only 4.3% of US spot Bitcoin ETF assets.

This rapid increase in ETHU positions highlights a rising demand for leveraged exposure to Ethereum, which starkly contrasts with the Bitcoin market’s status. Lunde interprets this as a strong indicator that traders are strategically preparing for upward trends in ETH, possibly in anticipation of regulatory moves or significant market events.

Image created using DALL-E, Chart data sourced from TradingView