Bitcoin Bulls Eyeing $105K as Derivatives Data Signals a Strong Rally

Bitcoin (BTC) has seen renewed bullish momentum, with recent derivatives data suggesting that the leading cryptocurrency could surge back above $100,000 and potentially reach $105,000. After experiencing a 6.5% rebound from its Dec. 23 low of $92,458, Bitcoin has faced resistance at the $98,000 mark. However, the market remains optimistic, even as the cryptocurrency grapples with volatility following its Dec. 17 all-time high of $108,275.

Strong Demand for Leverage Positions

Bitcoin futures data indicates continued investor confidence. The monthly Bitcoin futures contracts are trading at a significant 12% premium compared to the spot market, suggesting strong demand for long (buy) positions with leverage. Typically, premiums in the range of 5-10% are considered neutral, as they reflect the extended settlement period for futures contracts. The 12% premium points to a more bullish sentiment, with traders positioning themselves for further price increases.

Moreover, Bitcoin options data shows that put (sell) options are trading at a 2% discount compared to call (buy) options. This is in line with the trend observed over the past two weeks. Historically, when large market players, such as whales, expect a downturn, the discount on put options tends to exceed 6%. The current 2% discount suggests that market participants are not anticipating a major correction in the near term.

Broader Market Recovery Supports Bitcoin's Rally

Bitcoin's recent rise above $98,000 has been further supported by a recovery in traditional financial markets. The S&P 500 index erased its monthly losses on Dec. 24, adding to the positive sentiment surrounding risk assets like Bitcoin. Additionally, U.S. 10-year Treasury yields climbed to 4.59% from 4.23% two weeks earlier, signaling that investors are demanding higher returns to hold government debt.

This increase in U.S. Treasury yields typically reflects concerns about rising inflation or government debt, which often results in investors seeking safer, scarce assets such as Bitcoin and equities. Historically, when central banks inject liquidity into the economy, Bitcoin has tended to perform well, making it an attractive alternative to traditional financial instruments.

Economic Uncertainty and Stagnation Risks

Despite the bullish outlook, Bitcoin's upside remains somewhat constrained as concerns about global economic stagnation linger. The cryptocurrency has shown a high correlation with the S&P 500, currently at 64%. With the U.S. Federal Reserve reducing its rate-cut projections for 2025—from four cuts to just two—market participants are adjusting expectations. This change has led to a reduced risk of corporate earnings declines and potential issues in real estate financing, but uncertainty persists.

As a result, the market is closely monitoring Bitcoin's margin trading activity. Unlike derivatives contracts, margin markets allow traders to borrow stablecoins to buy Bitcoin or borrow BTC to establish short positions, betting on price drops. Currently, the long-to-short margin ratio for Bitcoin at OKX stands at 25x, favoring long positions. When this ratio rises above 40x, it typically signals excessive confidence, while levels below 5x indicate bearish sentiment.

Optimism Remains Strong Despite Market Outflows

Despite record outflows from BlackRock’s iShares Bitcoin Trust ETF (IBIT) on Dec. 24, both Bitcoin derivatives and margin markets are showing bullish momentum. The resilience observed during Bitcoin's retest of the $92,458 level on Dec. 23 suggests that the market is prepared for a potential rally. With significant support at this price level and strong demand for long positions, there remains optimism that Bitcoin could soon break through resistance and move toward the $105,000 mark.

Conclusion

Bitcoin’s technical indicators and derivatives data suggest that the cryptocurrency is poised for another leg up. With a bullish long-to-short margin ratio, strong futures premiums, and a favorable economic backdrop, the conditions are ripe for Bitcoin to break through the $98,000 resistance and aim for $105,000. However, global economic risks and stagnation fears remain present, and market participants will continue to monitor any shifts in sentiment. As we move into the new year, Bitcoin bulls are ready to test new highs, with the potential to surpass previous records.