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After Bitcoin slipped below $21,000 levels on Thursday, traders are pondering headwinds, including a widening liquidity crisis among major crypto-friendly banks, underway macro headwinds As US Federal Reserve System Risk-inducing Bitcoin options have become the most pessimistic about the cryptocurrency’s near-term price outlook this year.
BTC/USD last traded in the $20,700s, down more than 5.0% over the past 24 hours according to CoinMarketCap, and is currently down about 18% from its year-to-date high in the low $25,000s. At the same time, the delta skew of 25% of Bitcoin options expiring in seven days on Thursday fell to about -6, the lowest since late December 2022.
Delta option skew of 25% is representative of the extent to which the trading desk is over- or under-billed for upside or downside protection via the put and call options it sells to investors. widely monitored as a good indicator. A put option gives the investor the right, but not the obligation, to sell the asset at a specified price, while a call option gives the investor the right, but not the obligation, to buy the asset at a specified price.
A delta option skew of 25% above 0 suggests that the desk is charging more for puts over comparable call options. This means there is more demand for calls than for puts. This can be interpreted as a bullish sign as investors are keen to secure protection against price increases.
Long-term view of price Holding company for the time being
The delta skew of 25% for options expiring in 30 and 60 days also dropped to the lowest levels of the year at about -3 and -2 respectively, while the delta skew of 25% for options expiring in 90 and 180 days decreased. The delta skew holds up and both remain close to zero. This is due to the current headwinds facing the market (crypto banks drop, increased scrutiny by US regulators, continued Fed tightening efforts) leading to a sustained drop in Bitcoin from current levels. This suggests that investors think it is unlikely.
The options market is also sending the message that Bitcoin investors are fairly optimistic about price volatility risk. Implied volatility from at-the-money (ATM) options that expire in 7, 30, 90 and 180 days has been largely unchanged over the last month.
Meanwhile, Deribit’s Bitcoin Volatility Index (DVOL) is also roughly unchanged from recent weeks at 49, still not far above its all-time low of 42 set earlier this year.
What’s next for Bitcoin (BTC)?
Bitcoin’s recent price crash created the possibility of a drop below the $20,000 level. However, traders are eyeing short-term support in the $19,700-$800 area in the form of the 200-day moving average and realized prices.
Looking at Bitcoin on a broader time horizon, Bitcoin’s latest drop remains within the range of the past eight months. Bitcoin has only recovered 50% from its November 2022 low, so further declines could be in store.
In the short term, Friday’s release of February US employment data and next week’s US CPI report will be the key to judging near-term momentum. Bulls are hoping for a downside surprise that could ease concerns about Fed tightening and give BTC price more room to recover.