Bitcoin Futures Premium Hits 7-Week High: Is the Rise Sustainable?

Author: Marcel Pechman, CoinTelegraph; Compiled by: Baishui, Golden Finance

BTC rose 2.5% to $69,400 on June 3, sparking hopes that it could reclaim the $69,000 support level for the first time in 11 days. This positive price action coincided with a surge in Bitcoin futures premiums to their highest level in seven weeks. But what does this mean for the sustainability of Bitcoin's rise toward $70,000?

GME mania and the decline in the likelihood of a Fed rate cut

Some analysts believe that Bitcoin's recent price rise was partly influenced by GameStop (GME)'s impressive 36% gain.GameStop's surge is reminiscent of the anti-traditional financial sentiment in 2021, when retail investors united to challenge the status quo. The sentiment appears to have spread to the memecoin space, with Floki up 16.5%, Dogwifhat (WIF) up 9%, and Bonk up 7.5%.

Adding to the uncertainty were comments from the Minneapolis Federal Reserve's (Fed) Neel Kashkari. The Fed official said he does not foresee a rate cut anytime soon, citing Americans' strong aversion to inflation. While this stance is not universally shared by Fed officials, it is seen as negative for real estate and the stock market. As a result, some investors have turned to alternative investments such as Bitcoin.

Global geopolitical tensions have also had an impact on Bitcoin's recent price action. Australia's decision to require Chinese investors to reduce their stake in a rare earth miner has added to uncertainty in global markets. Meanwhile, gold prices rose 1% and U.S. Treasuries sold off, with the 5-year Treasury yield falling to 4.42% from 4.59% on May 31.

Bitcoin derivatives support further price increases

The Bitcoin futures premium reflects the difference between the derivatives market's monthly contracts and the regular exchange spot level. Typically, an annualized premium (basis) of 5% to 10% occurs to compensate for deferred settlement. Essentially, a higher premium indicates that traders are willing to pay more for future contracts, indicating bullish sentiment.

Bitcoin 3-month futures annualized premium. Source: Laevitas.ch

Bitcoin 3-month futures premium rose to 15%, the highest level in seven weeks. This shows that traders' sentiment is cautiously optimistic, which is crucial to avoid chain liquidations during unexpected negative price fluctuations. However, to infer whether this sentiment exists only in the futures market, the 25% delta deviation of Bitcoin options should be analyzed.

The delta deviation measures the relative demand for call and put options. A negative deviation indicates a higher demand for call options (buys), while a positive deviation indicates a preference for put options (sells). A neutral market typically holds a delta deviation of -7% to +7%, indicating a pricing balance between call and put options.

25% delta deviation of Bitcoin 2-month options. Source: Laevitas.ch

Note that the 25% delta deviation indicator has remained stable around -3% over the past week, suggesting that traders are neither overly optimistic nor overly pessimistic about Bitcoin’s short-term price action.The last time Bitcoin options showed signs of optimism was on May 21, but that was short-lived as resistance at $71,500 proved difficult to overcome.

Recent data points to a healthy Bitcoin market, with demand driven by a variety of factors, including recession fears, geopolitical uncertainty, and a resurgence in anti-traditional financial sentiment. Key indicators such as the Bitcoin futures premium and 25% delta deviation suggest traders are cautiously optimistic, providing a stable foundation for further price moves above $70,000.