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Bitcoin remains constrained, hovering around yearly lows, with near-term bullish momentum. The cryptocurrency suffered from the FTX crash and subsequent contagion, but market participants seem more optimistic about potential earnings.

As of this writing, Bitcoin is back to yesterday’s highs. BTC price is trading at $16,500 with sideways movement across the board. Other cryptocurrencies in the top 10 by market capitalization show similar price action. XRP remains the best performing asset in the ranking.

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The price of BTC is moving sideways on the daily chart. Source: BTCUSDT Tradingview

Bitcoin sentiment is improving in the derivatives sector

Deribit Options Platform Data noted that the change in sentiment affects this sector. The collapse of FTX and the uncertainty surrounding other crypto companies, such as Digital Currency Group (DCG) and crypto lender Genesis, kept the market on edge.

The latter company has halted withdrawal requests from its customers and is seeking to raise emergency capital to resume operations. According to rumors circulating last week, Genesis parent company DCG could be affected.

The company denied the speculation and reaffirmed its long-term intentions to remain in the industry. As a result, the crypto market rebounded as investor confidence improved. Additionally, the US Federal Reserve hints at a potential pivot.

Both of these support the bullish momentum. Deribit noted that the bulls took advantage of last week’s price decline to rack up calls (buy orders) on the cheap.

Optimistic investors acquire calls with strike prices above $17,000, $18,000 and $19,000 in December. In other words, the options market is betting on Bitcoin, trending higher by the end of the year.

Deribit noted the following on implied volatility (IV), a measure affected by recent events. The metric is returning to normal levels, hinting that the market is finally absorbing any risk associated with FTX: However, options with near expiration dates (December 2) could lose value due to the weekend at low volume of transactions.

(…) the reprieve from the news feed has also allowed the implied flight to return from a high-tension shift a few days ago, to a more normal contango term structure.

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Implied volatility for BTC options declines after FTX crash. Source: Flow

A Christmas miracle?

Over the past 24 hours, the options trading platform noted, bearish investors have unloaded some of their put contracts. These investors are betting Bitcoin below $10,000. There is still bearish activity targeting the end of 2022.

However, these investors could hedge long spot positions and protect themselves against possible unexpected events. The current state of the crypto market and the possibility of greater contagion make this strategy favorable for long-term investors.

Additional data provided by Deribit indicates that the sector has nearly $5 billion in open interest (OI) in total. The majority of this metric seems positioned on the upside.

For the December 30 expiry, bullish investors are betting on Bitcoin breaking above $30,000. The maximum pain scenario, where most options have expired worthless, amounts to $20,000.

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BTC options open interest for December 30 expiry. Source: Flow





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