Bitcoin Pauses Near All-Time Highs Due to Derivative Pressures, But Breakout Opportunities Persist

Bitcoin (BTC) continues to show robust on-chain activity, even as it experiences a prolonged price range between $100,000 and $105,000.

The Vice President of Research at Fidelity Digital Assets, Chris Kuiper, indicates that the leading cryptocurrency is in an “Acceleration Phase,” which is marked by heightened wallet profitability and volatility, even though activity in derivatives is somewhat hindering price increases.

On May 13, Bitcoin closed at $104,119, with 99% of addresses in profit. Data from Fidelity shows that ten days in May have been characterized by high profit and significant volatility. Historically, this phase has been associated with breakout movements, including the rise that occurred after the U.S. election in late 2020.

Despite these favorable conditions, Bitcoin has struggled to break through its upper resistance levels, with closing prices generally remaining within a tight $94,000 to $104,000 range during the first part of May.

Challenges in the derivatives market

A recent report from CryptoQuant contributor Darkfost, dated May 16, asserts that the limited price action is largely a result of structural pressures in the derivatives sector.

This report pointed out that the cumulative net taker volume, which tracks aggressive trading activities, has been negative since Bitcoin regained the $100,000 mark. Such an imbalance indicates that short positions have outnumbered long positions, contributing to ongoing selling pressure.

This bearish sentiment signifies that traders are doubtful about a near-term surge to new all-time highs, actively wagering against further price increases. As long as this disparity persists, Bitcoin’s upward movement is likely to remain constrained, despite favorable indicators in spot and on-chain markets.

Experiencing price stagnation amidst bullish fundamentals is not unusual. However, even the strongest network indicators can be temporarily overshadowed when derivative flows dominate spot purchases.

The current divide between derivatives activity and on-chain profitability underscores the challenges in Bitcoin’s price discovery process.

Bitcoin’s volatility falls to historic lows compared to gold

The subdued price fluctuations of Bitcoin have led to an unprecedented drop in volatility, reaching levels not seen in over a decade.

Matthew Sigel, head of digital assets research at VanEck, remarked on May 16 that Bitcoin’s 30-day volatility has dipped below that of gold for the first time since record-keeping began.

According to metrics from Bloomberg, the BBR/GC1 ratio now stands at 0.857, marking its lowest level in ten years.

While current positioning in derivatives poses a short-term challenge, historical trends indicate that extended periods of low volatility are often followed by significant price movements.

The realization of such movements will depend on changes in taker flow, macroeconomic conditions, and liquidity levels.

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