Bitcoin options show pro traders expect more downside, but also plan to accumulate

Key takeaways:

• Bitcoin funding rates sit at 7%, showing bullish traders are still hesitant to increase leveraged positions.

• The spot Bitcoin ETFs saw $1.58 billion in outflows while gold hit record highs, signaling a shift toward safe assets.

Bitcoin (BTC) has been pinned below $91,000 since Tuesday, even as equity markets rallied on strong US economic growth and employment data. As BTC struggles to find bullish momentum, muted demand for leveraged long BTC positions has led traders to question whether the $88,000 support level can hold much longer.

The annualized funding rate for Bitcoin perpetual futures stood at 7% on Thursday, slightly missing the typical neutral range of 6% to 12%. While this marks a recovery from Monday, when the indicator nearly hit zero, significant demand for bullish leverage is still missing from the market.

Bitcoin whales are expected to keep accumulating

The lack of optimism among Bitcoin traders stems partly from the robust 4.4% third-quarter US GDP growth. A strong economy generally fuels earnings momentum, providing a tailwind for the stock market. Continuing jobless claims fell by 26,000 to 1.85 million for the week ending Jan. 10. 

Despite this tepid conviction, there has been no notable surge in demand for downside protection via BTC options.

According to data from Laevitas, the two most active BTC options strategies on Wednesday and Thursday were the long straddle and the long Iron Condor. Both strategies prioritize volatility over directional bets. This suggests that whales and market makers are anticipating a period of price accumulation rather than a deeper correction from the current $89,500 level.

To determine if professional traders are holding firm following an 11% weekly correction from the Jan. 14 peak of $97,900, one must analyze exchange long-to-short ratios. This metric offers a broader view than a single contract by aggregating positions across futures, perpetuals, and margin markets.

Top traders at Binance increased bullish exposure on Thursday, with the long-to-short ratio rising to 2.18 from 2.08. Similarly, the top 20% of users by margin on OKX boosted long positions on Thursday despite Bitcoin’s failure to reclaim $90,000. This onchain data reinforces the view that traders remain neutral-to-bullish despite the current lack of appetite for high-leverage plays.

Market attention is now shifting toward corporate earnings. Several major companies report next week, including Microsoft (MSFT US) and Tesla (TSLA US) on Wednesday, followed by Apple (AAPL US) and Visa (V US) on Thursday. Consumer demand will also be scrutinized as General Motors (GM US) and Starbucks (SBUX US) release their reports on Tuesday and Wednesday.

Gold prices hit an all-time high on Thursday as 10-year US Treasury yields approached 20-week highs. This divergence typically signals waning confidence in US fiscal health, and investors are clearly worried that further economic stimulus may trigger inflation, given the expanding US deficit.

Related: Bitcoin’s 16.7K inflow to exchanges raises alarm: Will BTC’s sell-off deepen?

Rising Treasury yields indicate lower buyer demand and higher borrowing costs for the government. The 10-year yield reached 4.25% on Thursday, up from 4.14% the previous week.

Ultimately, Bitcoin derivatives are showing resilience after the $88,000 retest, with few signs of bearish sentiment. However, a move back toward $95,000 depends heavily on institutional inflows. This trend has yet to materialize following $1.58 billion in net outflows from Bitcoin spot ETFs over the past two days.