Bitcoin Holds Above $107,000 Amid Central Bank Liquidity Hopes

Bitcoin (BTC) has been trading within a narrow range of $107,300 to $110,600 since Wednesday, sparking speculation about a potential price surge. Market participants are increasingly optimistic that fresh liquidity injections by major central banks could act as a catalyst for a Bitcoin bull run. This optimism is bolstered by the reduced demand for downside protection in Bitcoin derivatives, indicating renewed investor confidence.

Market analyst TedPillows noted that Bitcoin has lagged behind the global monetary supply chart. If the historical correlation between the two remains intact, Bitcoin may be poised for gains. Additionally, TedPillows argued that the delay in US import tariff deadlines signals a green light for Bitcoin to reach $120,000. The US Treasury Secretary announced that import tariffs will increase on Aug. 11 for countries that haven’t reached an agreement with the administration, initially set for July 9. Investors welcomed the extension as a sign of progress in avoiding a trade war.

On Saturday, demand for put (sell) options on Deribit surged, pushing the put-to-call ratio to its highest level in over a year. This unusual activity may reflect heightened demand for downside protection, but the effect appears to have faded by Monday, with the indicator reverting to 0.8, favoring call (buy) options. If traders were significantly increasing their leveraged bearish bets on Bitcoin, the BTC futures premium would likely have been affected. In neutral conditions, monthly contracts usually trade at a 5% to 10% premium to spot prices. A spike in short (sell) demand tends to drive that premium below 5%.

Futures data supports the notion of increased bearish sentiment over the weekend, as the BTC futures premium dipped to 3.5% on Saturday, down from 4.5% on Friday. However, by Monday, the premium rose above the 5% neutral mark, even though BTC traded below $108,000. This shift suggests renewed investor confidence, particularly notable given the S&P 500 index dropped 0.9% on Monday.

Concerns over economic recession deepened after the announcement of a 25% tariff hike on imports from Japan and South Korea. In response, the yield on the US 10-year Treasury note climbed to its highest level in two weeks, as investors demanded greater returns for holding government debt. The trade-related tensions prompted a broader shift toward risk aversion. Still, Bitcoin’s ability to remain above $107,000, coupled with improved derivatives indicators, reinforces the case for a rally to $120,000.

Ultimately, whether or not that prediction comes true will depend on a broader change in investor perception, from viewing Bitcoin as a risk-on asset to an alternative financial system. This shift in sentiment is crucial for Bitcoin to achieve its potential rally to $120,000. The reduced demand for downside protection and the improved derivatives indicators suggest that investors are becoming more confident in Bitcoin’s prospects, despite broader recession fears.