Bitcoin's Bullish Momentum Fades as Futures Premium Drops 2%

Bitcoin (BTC) has faced challenges in surpassing the $105,000 mark since May 10, leading traders to question the sustainability of the bullish momentum. Despite reclaiming the $104,000 level, the demand for leveraged long positions has significantly decreased, as evidenced by the decline in the Bitcoin futures premium. On May 14, the annualized Bitcoin futures premium peaked at 7% but subsequently fell to 5%, nearing the neutral-to-bearish threshold. This decline in demand for leveraged bullish positions is linked to broader macroeconomic uncertainty, as Bitcoin's price movements have closely followed those of the stock market.

The S&P 500 futures reversed early weakness on May 15, coinciding with Bitcoin’s rebound from $101,800 to $104,000. Investors are more confident that the US Treasury will inject liquidity after Federal Reserve Chair Jerome Powell warned that “supply shocks” could keep interest rates higher for longer than expected. Economic weakness has also emerged, with the US Bureau of Labor Statistics reporting that April’s Producer Price Index fell 0.5% from the previous month, contrary to economists' expectations of a 0.2% rise. Ongoing global trade tensions, particularly the US–China tariff agreement, have also influenced investors' limited risk appetite.

Demand for fixed income has increased, with the yield on the 10-year US Treasury dropping to 4.45% after reaching 4.55% on May 14, reversing the previous week’s trend. Historically, Bitcoin tends to perform better when government bond yields are rising, as this signals reduced confidence in the Treasury’s ability to manage its debt. To assess whether traders are avoiding leverage or actively betting on a price decline, it is helpful to analyze Bitcoin options demand. Typically, periods of bearish sentiment push the BTC delta skew indicator above the neutral 6% threshold. Contrary to expectations, Bitcoin put (sell) options have been trading at a discount compared to call (buy) options, signaling strong confidence in the $100,000 support level. However, the optimism seen on May 14 has faded, with the indicator now at a neutral -4%.

Bitcoin’s rally to $105,000 hinges on macroeconomic trends. The chances of breaking above $105,000 depend heavily on developments such as trends in the US Federal Reserve’s balance sheet and recession risks. Notably, Bitcoin’s high correlation with the S&P 500 rarely persists for more than two months. Net inflows of $320 million into US Bitcoin exchange-traded funds (ETFs) on May 14 point to ongoing institutional demand. This suggests that investors are gradually shifting their perception of Bitcoin from a risk-on asset to a non-correlated instrument, which may reduce the likelihood of sharp price corrections, even in the absence of strong leveraged bullish positions.