Bitcoin Options Indicate Bullish Sentiment, Says Analyst
Bitcoin options are showing signs of bullish sentiment, as evidenced by the strike positioning and put-call ratio for March’s end-of-month expiry, according to one analyst.
The highest traded instruments by volume since bitcoin reached a new all-time high are monthly and mid-month expiry call options with a strike price of $70,000, said Bitfinex Head of Derivatives Jag Kooner.
Concentration of Calls at $70,000 Strike Price
Both Friday’s end-of-week and March’s end-of-month expiries on Deribit, the largest bitcoin options platform in the world, show a concentration of call options at the $70,000 strike price.
Bullish Put-Call Ratio
Kooner suggests that the current put-call ratio of bitcoin options indicates traders are displaying a bullish bias. The put-call ratio has consistently stayed below 0.6 for the first time in six months, with the 24-hour put-call ratio at an even more bullish outlook of 0.47.
A put-call ratio of less than 1 implies bullish sentiment, indicating more interest in potential upside (calls). In contrast, a put-call ratio greater than 1 typically suggests bearish sentiment, indicating more interest in downside protection (puts).
Implied Volatility Decreases
There has been a recent decrease in implied volatility in the bitcoin options market, signaling lower volatility expectations among traders in the past 24 hours. This has led to a drop in premiums for options across all strike prices, making it cheaper to take on positions.
The implied volatility index for bitcoin on Deribit dropped from 77% to 72% in the past 24 hours.
Declining implied volatility values often result in a decline in option premiums because the expectation of less future volatility compared to the past reduces risk for options market participants, said Kooner.
Understanding Options
Options are derivative contracts that give traders the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, while a put option offers the right to sell. Buying put options is typically seen as bearish, while buying call options indicates a bullish sentiment.
Hot Take: Bullish Sentiment in Bitcoin Options Market
The concentration of call options at the $70,000 strike price and the bullish put-call ratio suggest that there is a strong sense of optimism among traders in the bitcoin options market. This indicates confidence in further upside potential for bitcoin’s price.
The decrease in implied volatility also supports this bullish sentiment, as it suggests that traders expect less volatility in the future. Lower volatility can attract more investors and reduce risk for options market participants.
Overall, these indicators point towards positive market sentiment and reinforce the belief that bitcoin’s price could continue to rise. However, it’s important to note that market conditions can change rapidly, so investors should exercise caution and stay informed about any developments that may impact the cryptocurrency market.
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