This week Bitcoin (BTC) rallied to a 2023 high at $23,100 and the move followed a notable recovery in traditional markets, especially the tech-heavy Nasdaq Composite Index, which gained 2.9% on Jan. 20.

Economic data continues to boost investors’ hope that the United States Federal Reserve will reduce the pace and length of interest rate hikes. For instance, sales of previously owned homes fell 1.5% in December, the 11th consecutive decline after high mortgage rates in the United States severely impacted demand.

On Jan. 20, Google announced that 12,000 workers were laid off, more than 6% of its global workforce. The bad news continues to trigger buying activity on risk assets, but Dubravko Lakos-Bujas, chief U.S. equity strategist at JPMorgan, expects weaker earnings guidance to “put downward pressure” on the stock market.

The fear of recession increased on Jan. 20 after Federal Reserve Governor Christopher Waller said that a soft recession should be tolerated if it meant bringing inflation down.

Some analysts have pegged Bitcoin’s gains to Digital Currency Group filing for Chapter 11 bankruptcy protection — allowing the troubled Genesis Capital to seek the reorganization of debts and its business activities. But, more importantly, the move decreases the risk of a fire sale on Grayscale Investments assets, including the $13.3 billion trust fund Grayscale GBTC.

Let’s look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.

Bitcoin margin longs dropped after the pump to $21,000

Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

OKX stablecoin/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio increased from Jan. 12 to Jan. 16, signaling that professional traders increased their leverage longs as Bitcoin gained 18%.

However, the indicator reversed its trend as the excessive leverage, 35 times larger for buying activity on Jan. 16, retreated to a neutral-to-bullish level on Jan. 20.

Currently at 15, the metric favors stablecoin borrowing by a wide margin and indicates that shorts are not confident about building bearish leveraged positions.

Still, such data does not explain whether pro traders became less bullish or decided to reduce their leverage by depositing additional margin. Hence, one should analyze options markets to understand if the sentiment has changed.

Options traders are neutral despite the recent rally

The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

Bitcoin 60-day options 25% delta skew: Source: Laevitas

As displayed above, the 25% delta skew reached its lowest level in more than 12 months on Jan. 15. Option traders were finally paying a premium for bullish strategies instead of the opposite.

Related: Genesis bankruptcy case scheduled for first hearing

Currently, at minus 2%, the delta skew signals that investors are pricing similar odds for bull and bear cases, which is somewhat less optimistic than expected considering the recent rally toward $22,000.

Derivatives data puts the bullish case in check as buyers using stablecoin margin significantly reduced their leverage and option markets are pricing similar risks for either side. On the other hand, bears have not found a level where they would be comfortable opening short positions by borrowing Bitcoin on margin markets.

Traditional markets continue to play a crucial role in setting the trend, but Bitcoin bulls have no reason to fear as long as derivatives metrics remain healthy.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.