Bitcoin Traders Stay Defensive Near Highs as Ethereum Leverage Climbs

Bitcoin has regained ground following last week’s decline triggered by a brief political controversy, recovering to around $110,000. Despite the rebound, many traders remain hesitant, showing caution even as the asset trades within 2% of its all-time high.

Analysts point to a persistent atmosphere of “disbelief” reflected in key market indicators, with participants opting to remain risk-averse ahead of macroeconomic data releases.

According to a recent report by K33 Research, the lack of bullish conviction in the derivatives market is notable. Negative funding rates and flat leveraged inflows are among the clearest signs.

These conditions suggest that rather than a speculative rush, the rally may be driven by underlying demand. Historical patterns show that Bitcoin rarely tops during such periods of negative sentiment and light positioning, often setting the stage for a potential leg higher.

Bitcoin Funding Data Reflects Conservative Positioning

K33’s Head of Research, Vetle Lunde, noted that Binance’s BTC/USDT perpetual contracts registered negative daily funding rates on Friday and Sunday, while the weekly funding average was just 1.3% annualized,  a level usually seen near local bottoms over the last two and a half years.

In such conditions, traders are generally paying to remain short, reflecting a prevailing bearish bias despite the price recovery. Lunde emphasized that such bearish sentiment could act as fuel for a future breakout.

In addition, data from the Volatility Shares 2x leveraged long Bitcoin ETF (BITX) adds to the cautious narrative. The fund holds just 52,435 BTC in exposure, significantly lower than its peak of 76,755 BTC in December.

Unlike previous rallies in March and November 2024, recent inflows into BITX have remained largely flat over the past month, suggesting that traders are refraining from aggressive bullish exposure via leverage. Analysts argue this defensive setup could lead to an unexpected surge if sentiment flips.

Ethereum Derivatives See Leverage Spike as ETF Flows Climb

While Bitcoin remains subdued on the leverage front, Ethereum markets are witnessing increased speculative activity. The Volatility Shares 2x leveraged Ethereum ETF (ETHU) has captured significant attention, becoming a dominant player in the ETH derivatives space.

According to K33, since April 8, ETHU has added over 305,000 ETH in exposure, exceeding the increase in CME ETH open interest during the same period.

ETHU now represents 18.3% of the ETH held by all US spot ETFs and about two-thirds of CME’s ETH open interest. This contrasts with BITX, which makes up only 4.3% of US spot Bitcoin ETF holdings.

The sharp rise in ETHU positions suggests heightened demand for leveraged Ethereum exposure, even as similar activity is absent from the Bitcoin space. Lunde interpreted this as a signal of traders positioning for upward movement in ETH, potentially ahead of policy developments or fundamental catalysts.

Featured image created with DALL-E, Chart from TradingView