Bitcoin price gains may be limited above $110,000 due to Bitcoin's correlation with stocks and recession fears in the U.S.

The value of Bitcoin (BTC) rose by 3.5% between June 7 and 9, approaching $108,500. Despite this recent increase, professional traders remain notably cautious, as evidenced by Bitcoin's derivatives metrics. Broader macroeconomic tensions persist, and Bitcoin continues to show a strong correlation with the stock market, limiting its short-term upside potential.

Some analysts predict that Bitcoin's price could rise to $150,000 as the U.S. government approaches a $4 trillion increase in its debt ceiling. However, futures market data suggests short-term hesitation, likely driven by unfavorable macroeconomic indicators and a misunderstanding of the potential supply shock of Bitcoin.

Annual premium on two-month Bitcoin futures contracts. Source: laevitas.ch

Since June 6, Bitcoin futures premiums have hovered around 5%, which is the usual level for neutral markets. The recent price increase has not sparked significant confidence among traders yet. However, it would be inaccurate to say that sentiment is entirely pessimistic, especially since Bitcoin is currently trading just under 3% from its all-time high of $111,965, recorded on May 22.

The recent price movement has not been driven by excessive leveraged speculation, which is an indicator of market fundamentals strength. However, if recession fears persist, it is unlikely that Bitcoin will maintain levels above $110,000, given its ongoing correlation with traditional stock markets.

50-day correlation, Bitcoin/US Dollar versus S&P 500 futures. Source: TradingView / Cointelegraph

Currently, Bitcoin's correlation with the S&P 500 index is 82%, indicating that the two assets are moving in similar directions. This trend has persisted over the past four weeks. Despite the volatility of this correlation over the past nine months, investors still largely view Bitcoin as a risky asset rather than a reliable hedge.

Bitcoin may face difficulties against broader adverse economic winds.

Investor concerns have been heightened by previous instances where the U.S. trade war escalated, negatively impacting almost all asset classes, including stocks, oil, and Bitcoin. Nevertheless, Bitcoin was specifically designed for periods of financial uncertainty. If confidence in the financial stability of the U.S. government deteriorates, risk expectations may shift in favor of Bitcoin.

Bitcoin margin ratio (long to short) on OKX. Source: OKX

The buy-sell margin ratio for Bitcoin on OKX shows a fourfold superiority in buy trades over sell trades. Historically, this excessive confidence has pushed this ratio to over 20 times, while levels below 5 times, which favor buy trades, are considered bearish.

However, none of these indicators suggest that large investors or market makers are preparing for a collapse in Bitcoin's price. $BTC

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