Nansen Says Bitcoin Investors Should Become Risky, Here’s Why

On-chain analytics platform Nansen believes that bitcoin (BTC) investors should adopt a risk-on strategy amid the current state of the market 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 averse

A risky investment strategy refers to market participants taking higher risks in search of greater returns in favorable economic conditions. This approach indicates a high risk appetite on the part of investors, which often drives asset prices higher.

Nansen analysts insist that investors are not resisting current green signals and narratives, such as the Fed’s rate cut, US presidential candidate Donald Trump’s dominance in the polls, the call-put spread of BTC 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 lies between the 10th and 90th percentiles. Implied volatility in the crypto market increased last week and rose to its highest level since May. This move suggests that options traders are turning bullish and demand for calls is accelerating.

Additionally, the BTC Crypto Risk Premium metric, which measures the equity risk premium, is flashing green as the indicator’s thresholds are the cumulative 25th and 75th percentiles.

Positive flows and narratives

Additionally, Bitcoin exchange-traded fund flows are increasing along with Ethereum-led on-chain fee growth, most likely due to the July 23 ETF launch. Likewise, stablecoins are experiencing an acceleration in market capitalization, suggesting higher net flows to the chain.

Nansen painted a soft landing scenario that dominated forecasts and flagged areas such as weak US demand, wage growth and inflation. However, retail equity sales have picked up, leading to a soft but firm macro environment.

“There is a word of caution with this, and it comes from stocks. There has been some correction driven by certain sectors, particularly semiconductors (-8%) last week. However, at 21.2 times the S&P 500 forward PE is still expensive, expectations are high, and markets have so far not rewarded the pace of earnings,” Nansen said.

However, Nansen has urged investors to adopt a “more cautious” strategy. It involves enjoying crypto concentration while properly managing stop-losses and maintaining some option protection for potential downsides.

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