Bitcoin (BTC) Investors Should Adopt a Risk-on Strategy, All Tactical Signals Are Flashing Green: Nansen

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.

Crypto market intelligence firm Nansen has advised bitcoin (BTC) investors to adopt a risk-on strategy amid the market's current condition, as all tactical signals are flashing green.

In its weekly research report, the firm highlighted positive crypto narratives that increase the likelihood of higher risk-adjusted crypto returns in the near term.

A risk-on investment strategy involves market participants taking on more risk in pursuit of greater returns amid favorable economic conditions. This approach typically signals a high-risk appetite from investors, which often propels rallies in asset prices.

According to Nansen's analysis, investors should not resist the all-green signals and narratives at the moment, which include the pricing of Fed rate cuts, the strong lead 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 sits between the 10th and 90th percentiles. Notably, the crypto market's implied volatility picked up last week and spiked to its highest level since May. Such a move indicates that options traders are turning bullish and that demand for calls is accelerating.

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

Positive Flows and Narratives

The report also noted positive bitcoin exchange-traded fund (ETF) flows, which are increasing alongside on-chain fee growth led by Ethereum, likely due to the ETF launch on July 23. Additionally, stablecoins are experiencing an acceleration in market cap, which suggests higher on-chain net inflows.

Overall, Nansen's analysis painted a scenario of a soft landing, with dominant forecasts flagging areas like weak U.S. demand, wage growth, and inflation. However, the report mentioned that 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,” the analysis stated.

In light of these observations, Nansen has urged investors to adopt a “more prudent” strategy, which involves enjoying the crypto rally while setting up proper stop-losses and maintaining some option protection for potential downsides.

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