Bitcoin Option Markets Flip Bullish as BTC Rally Heats Up, Price Rises Above $28K
A change in the pricing of options on the market illustrates how investors’ views on the prognosis for the price of bitcoin have changed from being negative to bullish in a couple of days. Investor sentiment has changed as the price of bitcoin exploded beyond $28,000 for the first time since early last June, bringing gains from earlier monthly lows to over 44%.
Annual gains are now closer to 70%, and Bitcoin is surging as a result of
1) rising demand for assets seen as safe havens due to issues with the global banking system
2) rising wagers that the US Federal Reserve won’t tighten monetary policy very much more. The Fed’s policy meeting will be a crucial event this coming week, as investors disagree on whether the bank will deliver one final rate boost of 25 basis points.
Options Markets Flip Bullish
The forecast for the BTC price according to the 25% delta skew of Bitcoin options expiring in 7, 30, 60, 90, and 180 days fell to its lowest levels of the year of between -5 and -10 last week when Bitcoin fell under $20,000 for the first time in two months.
The 25% delta skew of Bitcoin options expiring in 7, 30, 60, 90, and 180 days has, however, quickly recovered into the bullish zone, with all of them near to 5. That represents the greatest level for the 7-day 25% delta skew since mid-February. That is the greatest level for the 30, 60, and 90-day skews since mid-January. Ultimately, that represents the 180-day skew’s highest point since November 2021.
The 25% delta skew of Bitcoin options expiring in 7, 30, 60, 90, and 180 days fell to their lowest values of the year of between -5 and -10 as Bitcoin fell under $20,000 for the first time in two months last week.
However, due to the robust price rebound, the 25% delta skew of Bitcoin options expiring in 7, 30, 60, 90, and 180 days has quickly recovered into bullish territory, with all of them being near to 5. That is its highest level since the middle of February for the 7-day 25% delta skew. That is their greatest level since the middle of January for the 30, 60, and 90-day skews. Last but not least, that is the 180-day skew’s highest point since November 2021.
As a result, the bitcoin options markets are signalling that investors are preparing for more increases. And given recent actions, that makes sense.
Where Next for the BTC Price?
A quick test of the psychologically significant $30,000 level and then the early June 2022 highs in the $32,500 area are now possible for Bitcoin now that it appears to have overcome opposition in the form of the late May 2022 lows in the $28,000 area. There isn’t really much opposition to stop such a demonstration, in fact.
The rising potential of Bitcoin appears to be supported by fundamentals. The price of Bitcoin should be supported if this week’s Fed meeting is dovish by related risk-on movements and loosening banking conditions. If the Fed isn’t as dovish as the market anticipates, this could lead to a brief price blip but would likely lead to more strains in the US banking system, which could boost demand for Bitcoin as a substitute safe-haven asset.
On-chain trends continue to appear promising. The key on-chain indicators, like the amount of wallets with non-zero balances, daily transactions, active addresses, and the rate of adding new addresses, are all on the correct track. Other indications such as those tracked in Glassnode’s “Recovering from a Bitcoin Bear” dashboard are (mainly) showing a positive signal as well.
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