The ongoing rally is challenging market expectations regarding the impact of spot Bitcoin ETF inflows, which were speculated to propel the leading asset to break all-time highs by the end of March.

With Bitcoin exceeding $59,000 on Wednesday, marking a gain of over 5%, indications suggest that a new peak may materialize sooner than anticipated.

Funding Rate Fears vs. Spot ETF Strength

The rally is primarily driven by demand, evidenced by spot ETF volumes surpassing $3.2 billion and net inflows totaling $520 million. The rapid price increase has triggered short liquidations and sparked a speculative buying frenzy, causing funding rates to soar on native exchanges and even longer-end futures trading up to more than 16% over the spot.

According to QCP Capital’s latest analysis, the initial response from the options market was unexpectedly subdued. Traders holding long calls were actively taking profits, and there was also interest in downside gamma. As a result, risk reversals (the difference between call-implied volatility and put-implied volatility) remained around 3%, which is unusual given the magnitude of the spot price movement.

As the spot price continued to climb, demand for volatility increased, but such fluctuation spikes were quickly sold off. Despite the significant price movement, the predominantly upward trajectory has kept realized volatility close to 40%. The crypto asset trading firm sees the large 60k strike as a natural target for March expiry.

Looking ahead, QCP Capital has acknowledged the possibility of speculative fervor being tempered by unsustainable funding rates, potentially leading to leverage washouts and a pullback to the $50,000 level.

However, the continued influx of large spot ETF inflows offers a counterbalance, likely sustaining the uptrend, especially with the upcoming BTC halving on the horizon.

Speculators And Traders Make a Comeback to Bitcoin

The surge in Bitcoin’s price is reigniting trader and speculator interest, as noted by Glassnode. Across various investor groups of Bitcoin, including institutional buyers and short-term holders, risk appetite is on the rise.

The on-chain intelligence platform’s data indicated heightened trading and speculation activity, fueled by a near-record $5.57 billion in daily exchange volume, predominantly influenced by short-term holders.