On-chain analytics platform Nansen believes bitcoin (BTC) investors should adopt a risk-on strategy amid the market’s current condition because all tactical signals are flashing green.
According to the firm’s weekly research report, crypto narratives are currently positive and increase the likelihood of higher risk-adjusted crypto returns in the near term.
Bitcoin Investors Should Become Risk-On
A risk-on investment strategy refers to market participants taking higher risks in pursuit of bigger returns amid favorable economic conditions. This approach signals a high-risk appetite from investors, which often propels asset price rallies.
Nansen’s analysts insist that investors do not resist current all-green signals and narratives, including the Fed rate cut pricing, the domination of U.S. presidential candidate Donald Trump in the polls, the BTC call-put spread, and the BTC Momentum metric, which is above the buy threshold.
The Bitcoin Call-Put spread, which measures the difference in implied volatility of BTC call derivatives compared to puts, currently hovers between the 10th and 90th percentiles. The crypto market’s implied volatility picked up last week and spiked to its highest level since May. Such a move suggests that options traders are becoming bullish and that demand for calls is accelerating.
In addition, the BTC Crypto Risk Premium metric, which measures equity risk premium, is flashing green, as the indicator’s thresholds are cumulative 25th and 75th percentiles.
Positive Flows and Narratives
Furthermore, Bitcoin exchange-traded fund flows are increasing alongside on-chain fee growth led by Ethereum, most likely due to the ETF launch on July 23. Likewise, stablecoins are experiencing an acceleration in market cap, suggesting higher on-chain net inflows.
Nansen painted a soft landing scenario that dominated forecasts and flagged areas like weak U.S. demand, wage growth, and inflation. However, retail equities sales have picked up, leading to a gentle but firm macro environment.
“There is one word of caution with this, and it comes from equities. There was some correction driven by certain sectors, notably Semiconductors (-8%) last week. However, at 21.2x the forward PE of the S&P 500 is still expensive, expectations are high, and so far, markets have not rewarded beats on earnings,” Nansen said.
Nevertheless, Nansen has urged investors to adopt a “more prudent” strategy. It entails enjoying the crypto rally while properly managing stop-losses and maintaining some option protection for potential downsides.