Bitcoin's current rally is different from previous ones - extreme leverage is noticeably absent

Bitcoin’s rebound from its July lows lacks a key feature of past moves: leverage.

Cryptocurrency traders haven’t added leverage as much as they did in past rallies. The spread between bitcoin futures and spot prices has shrunk compared with February, when the cryptocurrency was on a tear and eventually hit a record high, suggesting demand for long positions to add leverage remains muted.

Stephane Ouelette of FRNT Financial pointed out that this may suggest two things. The first is that traders are not convinced that Bitcoin's return to above $46,000 this time is a real breakthrough. But in Ouelette's eyes, judging from the trajectory of past rallies, it is more likely that leveraged accounts have not yet participated. If they do so, it will make the recent wave of $100,000 price predictions more likely to be realized.

“We think the leveraged part of the rally will come later,” Ouellette, co-founder and CEO of FRNT, said on Bloomberg’s “QuickTake Stock” streaming show. “If that’s the case, then $100,000 is a very reasonable target. The last time we saw this kind of unleveraged situation, we didn’t even get to $20,000 until Bitcoin went to $40,000, and then leverage came in quickly and drove the price to $65,000.”

Bitcoin has been climbing steadily recently, rising in five of the past seven trading days and breaking through key levels. Bitcoin rose as much as 4.9% to $46,679 on Friday. It has risen about 50% since it fell below $30,000 this summer and hit its recent low.