Bitcoin (BTC) has been trading within a narrow 4.5% range over the past two weeks, indicating a level of consolidation around the $34,700 mark.
Despite the stagnant prices, the 24.2% gains since Oct. 7 instill confidence, driven by the impending effects of the 2024 halving and the potential approval of a Bitcoin spot exchange-traded fund (ETF) in the United States.
Investors worry about the bearish global economic outlook
Bears expect further macroeconomic data supporting a global economic contraction as the U.S. Federal Reserve holds their interest rate above 5.25% in order to curb inflation. For instance, on Nov. 6, China exports shrank 6.4% from a year earlier in October. Furthermore, Germany reported October industrial production down 1.4% versus prior month on Nov. 7.
The weaker global economic activity has led to WTI oil prices dipping below $78 for the first time since late July, despite the potential for supply cuts from major oil producers. Remarks by U.S. Federal Reserve Bank of Minneapolis President Neel Kashkari on Nov. 6 has set a bearish tone, prompting a ‘flight-to-quality’ response.
“ We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.”
Investors have sought refuge in U.S. Treasuries, resulting in the 10-year note yield dropping to 4.55%, its lowest level in six weeks. Curiously, the S&P 500 stock market index has reached 4,383 points, its highest level in nearly seven weeks, defying expectations during a global economic slowdown.
This phenomenon can be attributed to the fact that the firms within the S&P 500 collectively hold $2.6 trillion in cash and equivalents, offering some protection as interest rates remain high. Despite increasing exposure to major tech companies, the stock market provides both scarcity and dividend yield, aligning with investor preferences during times of uncertainty.
Meanwhile, Bitcoin’s futures open interest has reached its highest level since April 2022, standing at $16.3 billion. This milestone gains even more significance as the Chicago Mercantile Exchange (CME) solidifies its position as the second-largest market for BTC derivatives.
Healthy demand for Bitcoin options and futures
Recent use of Bitcoin futures and options have made media headlines. The demand for leverage is likely fueled by what investors believe are the two most bullish catalyst for 2024: the potential for a spot BTC ETF and the Bitcoin halving.
One way to gauge market…