Bitcoin's Surge Lacks Extreme Leverage That Supported Its Past Rallies

The spread between Bitcoin futures and its spot price has shriveled relative to February, when the cryptocurrency was in the midst of a rally that ultimately reached an all-time high

Bitcoin's rebound from the depths of July is still missing one of its usual star players: Leverage. Crypto traders have yet to meaningfully pile on leverage -- essentially, borrowed money that can amplify returns or losses -- as they have in past rallies. The spread between Bitcoin futures and its spot price has shriveled relative to February, when the cryptocurrency was in the midst of a rally that ultimately reached an all-time high, suggesting that demand for leveraged long positions remains muted. To FRNT Financial's Stephane Ouellette, that could suggest two things -- the first being that traders aren't convinced Bitcoin's return to more than $46,000 is a true breakout. But in Ouellette's eyes, the more likely scenario is that the leveraged players are still to come, judging by the trajectory of past rallies -- and if they do, that would make the recent wave of $100,000 price forecasts more likely to materialize, he said. “Typically we look at that as more of a strong-handed rally, which implies that the leverage portion of the rally comes later,” Ouellette, FRNT's co-founder and chief executive officer, said on Bloomberg's “QuickTake Stock” streaming program. “If that is the case, those $100,000 targets are very reasonable, I'd suggest. The last time we saw a move of this little leverage, we were pointing towards $20,000, and we didn't really see the leverage come into the market in an aggressive way until we got to $40,000, which took us to $65,000.”  Up in five of the last seven sessions, Bitcoin has been steadily climbing higher, breaking above key levels that bulls said precipitate a further rally. That includes Friday, when the coin continued its uptrend, rising as much as 4.9% to $46,679. And it's up roughly 50% since hitting a recent low that had taken it below $30,000 at one point this summer.