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In just a few days, investor views on the Bitcoin price outlook have flipped from bearish to bullish, as represented by changes in options market pricing. The reversal in investor sentiment comes when Bitcoin’s price surges above the $28,000 level for the first time since early June last year, rising more than 44% from its lows at the start of the month.
With annual returns now approaching 70%, Bitcoin is 1) rising amid growing demand for assets seen as a safe haven given. Trouble in the world’s banking system 2) Increased bets that the US Federal Reserve (Fed) will not engage in further tightening. In fact, in the next week, Fed Policy Meeting Becomes Key Eventinvestors are divided on whether banks will raise rates by the final 25 basis points.
Options Market Turns Bullish
When Bitcoin dipped below $20,000 for the first time in two months last week, the BTC price outlook was – A year between 5 and -10.
However, with aggressive price recovery, the delta skew of 25% for Bitcoin options expiring at 7, 30, 60, 90, and 180 days quickly recovered to bullish territory, all approaching 5. For 25% delta skew over the seven days, this is his highest since mid-February. The 30, 60, and 90 days of skew are the highest levels since mid-January. Finally, the 180-day skew is the highest level since November 2021.
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 that the demand for calls is stronger than for puts. This can be interpreted as a bullish sign as investors are keen to secure protection (or bets) against rising prices.
The Bitcoin options market is therefore sending the message that investors are positioning for further gains.
What’s next for BTC price?
With Bitcoin appearing to have cleared resistance in the form of a low of $28,000 in late May 2022, the psychologically important $30,000 level and a quick high of $32,500 in early June 2022 are now on the horizon. The door to testing has been opened. In fact, there is little resistance to prevent such a rise.
Fundamentals continue to likely support Bitcoin’s rise. If this week’s Fed is dovish, the associated risk-on flow and easing financial conditions should support Bitcoin price. If the Fed is not as dovish as the market hopes, it could cause short-term price volatility, but it could also lead to more tensions in the U.S. banking sector, and Bitcoin as a safe haven. Demand may increase.
All the while, the on-chain trend looks positive. Key on-chain metrics such as the number of wallets with non-zero balances, daily transactions, daily active addresses, and new address creation rate are all headed in the right direction. Alternative indicators like the one tracked in the “recovery from” dashboard are also flashing (mostly) bullish signals.