Small investors are stepping up bullish bets on bitcoin, open interest data shows

Published Wed, Mar 30 20224:47 PM EDTUpdated Wed, Mar 30 20226:20 PM EDT

Though bitcoin has been cruising higher for most of March, investor sentiment has been especially optimistic since Sunday. Vanda Research says small investors are banking on continued momentum. The price of bitcoin broke above $45,000 over the weekend — that's a key level that bitcoin had been bouncing against this year. The next leg up — $50,000 — is a key psychological threshold that many observers believe is likely to pull big investors off the sidelines and into the market, driving the cryptocurrency to its all-time high or beyond. Smaller investors, meanwhile, are betting on it happening, according to an analysis of bitcoin open interest by Vanda. "Crypto investors have geared-up their bullish bets," Marco Iachini, senior vice president of research at Vanda, said in a note to investors Wednesday. "Activity in crypto derivatives markets has picked up in recent weeks. Open interest has now climbed for three consecutive weeks to levels last seen during the November '21 peak; with the majority of new speculative positions opened being 'new longs' around the US$45,000 level." Bitcoin last traded just below $47,000, according to Coin Metrics. That's where the majority of short interest still stands, and the longer it holds that level, the more likely it is to break higher, Vanda says. Bitcoin prices have moved in tandem with traditional risk assets for several months. However, there have been several positive catalysts in March that go beyond closely watched movements in Ukraine and at the Federal Reserve. They start with the "benign stance" from President Joe Biden's executive order on cryptocurrencies at the start of the month, which Vanda said sparked the rally. Beyond that, Vanda highlighted a Goldman Sachs study showing 60% of surveyed clients expect to increase their crypto holdings in the next year or two. It also noted that Treasury Secretary Janet Yellen's stance on crypto appears to be coming around. "There have been benefits from crypto, and we recognize that innovation in the payment system can be a healthy thing," she recently told CNBC's "Squawk Box." "We would like to come out eventually with recommendations that will create a regulatory environment for innovation." Vanda also noted Terraform Labs' bitcoin-buying spree for its stablecoin reserves. The developer plans to buy $10 billion for the reserves and has reportedly bought more than $1 billion already since the beginning of the year.

Olemedia | Istock | Getty Images

Though bitcoin has been cruising higher for most of March, investor sentiment has been especially optimistic since Sunday. Vanda Research says small investors are banking on continued momentum.