Bitcoin Reclaims $108,000 Amid Middle East Tensions and ETF Inflows

Bitcoin (BTC) has shown remarkable resilience, reclaiming the $108,000 mark on Monday after retesting the $104,000 support level over the weekend. This surge came amidst escalating tensions in the Middle East and a shift in investor expectations regarding interest rate cuts in the United States, indicating a strong belief in Bitcoin’s potential for further gains.

Despite the worsening socio-economic outlook, traders' sentiment remained stable. This stability was reflected in Bitcoin derivatives metrics, which showed a neutral market sentiment. The Bitcoin futures premium reached 5% on Monday, which is the baseline for neutral markets. This premium typically ranges from 5% to 10% to account for the longer settlement period. The market's resilience was evident as there was little reaction during the $101,000 retest on June 5.

US-listed spot Bitcoin exchange-traded funds (ETFs) saw significant net inflows, with $301.7 million on Friday and an additional $1.05 billion purchase announced on Monday. These inflows helped alleviate traders' concerns about a potential economic recession and the adverse effects of the conflict involving Iran, a major oil producer. The market's reaction to the conflict was relatively modest, with oil prices initially surging but then pulling back. West Texas Intermediate (WTI) futures reached $78 before dropping to around $71.50 per barrel by Monday, coinciding with a 1.5% gain in Nasdaq futures. Market participants expect tensions in the Middle East to ease.

However, Bitcoin faces challenges from rising energy costs and delayed Federal Reserve rate cuts. Some analysts point to the risk of rising energy prices, which could hinder Bitcoin's path to reclaiming $110,000. Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, noted that the market reaction has been modest, leaving room for disappointment if tensions escalate. Additionally, rising inflationary pressure has reduced the likelihood of the Federal Reserve cutting interest rates, with traders pricing in a 63% chance that rates will remain at 4% or higher by November, up from 56% a month earlier.

Bitcoin traders' growing confidence was also evident in the options market, where the 25% delta skew (put-call) dropped to a neutral 1% on Monday, after reaching 6% on Sunday. Readings above 5% are generally seen as bearish, reflecting higher demand for protective put options from market makers and arbitrage desks. Despite mounting uncertainty and recession fears, Bitcoin is trading just 4% below its all-time high of $111,965 from May 22. This environment favors further price appreciation, as bears have failed to trigger panic amid escalating global tensions.

Ultimately, Bitcoin’s path to $112,000 remains closely tied to reduced tariff-related uncertainty, regardless of developments in the Middle East. The market's resilience and steady inflows into Bitcoin ETFs suggest that traders are confident in the cryptocurrency's upside potential, despite the challenges posed by rising energy costs and delayed rate cuts.