- Bitcoin’s three-month futures basis has increased, signaling a return of speculative interest and leverage in the derivatives market.
- Coinbase CEO Brian Armstrong notes retail investors are resilient and buying the dip, with most customers seeing balances equal to or greater than December levels.
- Analysts warn the increased leverage could lead to volatile movements, with retail traders often suffering the most during market unwinds.
Despite Bitcoin trading sideways between $62,000 and $71,000 since early February, traders are piling back into leveraged positions, data shows. This increased activity suggests a market gradually regaining its risk-on footing after weeks of uncertainty.
The annualized three-month futures basis on major exchanges like Binance and Deribit has widened from 1.5% to about 4% since February 13. Consequently, aggregated funding rates are also rising, indicating long-position speculators are becoming more dominant.
However, options markets signal a more cautious sentiment, as the demand for downside protection has waned. Meanwhile, Coinbase CEO Brian Armstrong tweeted that retail users have been very resilient and are buying the dip.
Nick Ruck, Director of LVRG Research, said “the increase in retail activity signals growing speculation and leverage buildup that frequently comes before volatile crypto movements.” He expects short-term potential for a leverage-driven rally and short squeezes if broader risk assets hold steady.
“Retail typically enters late and suffers the most on unwinds,” Ruck explained, suggesting this setup may mark a near-term bottom only after an over-leveraged shakeout occurs. Ryan Yoon, a senior analyst at Tiger Research, warns current positive sentiment is not yet supported by sufficient trading volume.
Yoon stated this disconnect creates a high-risk environment where any sudden downside could lead to a mass surrender of interest. Bitcoin is currently trading around $68,600, down nearly 2.5% over the past 24 hours according to CoinGecko data.
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