What are the reasons that Bitcoin prices may reach an all-time high in May?

Author: Marcel Pechman, CoinTelegraph; Translated by: Deng Tong, Jinse Finance

• A significant amount of liquidation played a role in Bitcoin's return to $95,000.
• The weakening correlation between Bitcoin and stocks highlights its increasing independence as an asset.
• The bullish stance of institutional investors stands in stark contrast to the cautious attitude of retail traders.

BTC rose by 11% between April 20 and April 26, staying near a two-month high of $94,000, demonstrating resilience. This rebound occurred after the Trump administration signaled a reduction in import tariffs and following strong corporate earnings reports.

In five days, the net inflow of funds into the spot Bitcoin Exchange-Traded Fund (ETF) reached a record 3.1 billion dollars, further boosting investors' confidence in Bitcoin. However, a key BTC derivatives indicator shows signs of bearish momentum, raising questions about whether the target of 100,000 dollars is still realistic.

Perpetual Bitcoin futures contracts are favored by retail traders because their prices are closely tied to the spot market. A positive funding rate means that buyers have to pay fees to maintain their positions, so a reversal of this rate is often associated with bearish trends.

Annualized funding rate for Bitcoin perpetual futures. Source: Laevitas.ch

The significant negative funding rates recorded on April 26 are extremely unusual during a bull market, as it indicates stronger demand from sellers. This indicator has been volatile since April 14, but as Bitcoin's price surged above $94,000, sellers were caught off guard. Since April 21, over $450 million in BTC short positions have been liquidated.

The partial recovery of confidence and the strong Bitcoin price can be attributed to the S&P 500 index's weekly increase of 7.1%. However, despite this optimistic sentiment, U.S. President Donald Trump reportedly stated on April 25 that negotiations would depend on concessions from China, which has led traders to question the sustainability of the recent rally.

The company's reported first-quarter earnings are based on data prior to the escalation of the trade war, so the factors driving the stock market and Bitcoin are different. In fact, Bitcoin's price is no longer closely correlated with the S&P 500 index.

30-day correlation: S&P 500 Index vs Bitcoin/USD. Source: TradingView / Cointelegraph

Currently, the 30-day correlation between the S&P 500 index and Bitcoin is 29%, significantly lower than the 60% level observed from mid-March to mid-April. Although this lower correlation does not imply a complete decoupling, as investor sentiment is still influenced by macroeconomic factors, it does indicate that Bitcoin is not merely an alternative to tech stocks.

The status of Bitcoin as an independent asset has been strengthened

Gold failed to maintain its bullish momentum after reaching a historical high of $3,500 on April 22, which significantly impacted Bitcoin's status as an independent asset class. Some traders have questioned the notion of "digital gold," but the longer BTC stays above $90,000, the greater the confidence of investors, potentially paving the way for further increases.

The increasing demand for bearish leverage in perpetual BTC futures is inconsistent with the sentiment of professional traders. Monthly Bitcoin futures contracts avoid volatile financing rates, allowing traders to know their leverage costs in advance.

Bitcoin 2-month futures annualized premium. Source: Laevitas.ch

On April 26, the two-month Bitcoin futures premium (basis) rose to its highest level in seven weeks, indicating increased interest in bullish positions. This indicator is currently at 6.5%, still within the neutral range of 5% to 10%, but moving away from bearish territory.

The disconnect between the leverage demand for perpetual futures and monthly BTC contracts is not uncommon. Even if retail traders remain cautious, the significant accumulation by institutions is enough to push the price of Bitcoin above $100,000 in the near future.